Philip Faure of Paragon Impact Discusses Digital ESG and SDG Impact Assessments

Philip

The executives of the business, for example, have gone. Wow. I didn't realize what this all meant. First of all, we have learned incredible amount about the space. They've embraced the potential of it is being a constructive debate around the board. And secondly, that visually we give them nice visual dashboards that show them the SDGs and where they're scoring.

And you can say, hey, guys, look at those. These two out of your five, SDGs aren't doing too great, but the other three are perfect. Fantastic. Let's just put a plan in place for those two that will move the needle. But quickly.

Paul

Hello and welcome to Rethink What Matters. The podcast dedicated to aligning the economy with the economy and everyone. For improved business performance, stronger families and a greener, cooler planet.

And today I'm joined by Phillip Forer, co-founder and CEO of Paragon Impact. We're going to be discussing digital, ESG and SDG impact assessments.

Philip

All right. Thank you very much, Paul. Very good to be here. Thanks for the opportunity to share the important work we do. Likewise, we are on a journey of trying to contribute to the future of this planet.

Paul

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

Philip

Yes, sure. So Paragon Impact is a Jersey based company on human jersey that is formed almost three years ago now. And the coming together of of different skillsets really into an a space that's new for all of us. I think we what we see finally, is that convergence of of the greenies that have always been shouting at us to save the planet and of course business waking up and saying, well, we better we better pay attention.

And so so in our business we have the three co-founders, the one being a sustainability expert who spent many years in the space. Second, who's a technologist, who's who's been in fintech for 50 plus years, and then myself, he brings more of the sort of commercial side to two things and having worked in finance for many years as well.

So you've put all three, three key skills together to build the business. And then, of course, employed a team, which is not to 12 of of again, different people with different backgrounds. It's some very deep ecological specialists, scientists. And then of course people that have worked in business pushing the ESG straight ESG agenda.

Paul

So what is a digital ESG and SDG impact assessment? Just tell us a little bit more about what that involves.

Philip

So we've been building this piece of technology for two 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 we'll I'm sure we'll get into that as we go along. But essentially, it's a digital portal which allows multiple users, you understand where they are on the journey in terms of of making an impact, understanding their impact in the world.

Paul

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

Philip

A lot of businesses have increasingly employed ESG ahead of ESG in a business, for example. What's what's wonderful to see is that over time, that's moved to the chief sustainability officer. So we see increasingly over the last few years these appointments historically a lot of these roles interacting in the CSR department or the human resources department and and of late under the CFO, thinking it's a finance role.

But we I think we all agree now that this needs to be a a CSO top role which sits right next to the CEO and is part of the strategic direction of any business. So the space is evolving. We seeing what was a less of a visible role coming off to the forefront now, working with the CEOs to to take the business in a new direction.

So it was largely manual, largely pasionate individuals helping businesses to perform their story very valuable roles. And, you know, wonderful reports have come out that 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 together and then be able to provide some sort of rating around a particular 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 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 your relationship, and then helping them gather that data and and make it converge qualitative and quantitative. So I think, you know, what we try to do is exactly that. We move away from this arm's length relationship with companies where you just consume what's out there to other working with the companies and actually helping them understand what data that need.

Gather that data both quantitative and qualitative, and then help them to actually do more accurate and objective assessment of of the information.

Paul

Well, what's driving this then? What drives them to contact you and say, Look, we want to do a digital ESG and SDG impact assessments? What's the what's the pain they have?

Philip

That'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. What's our impact in the environment? And society? And so you do have those proactive companies. But 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.

Paul

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.

Philip

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 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 a world where ESG was very much.

What is the risk to my business of this thing called ESG, the environment, social governance, How is it going to impact me as a business, particularly around finance? How are investors going to be impacted by these risks that ESG face? And that's where the ESG has been in this 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 been measured, as we know, by the SDGs. Far more detail framework, a universal language that we can all subscribe to as opposed to the very broad ESG. So is this 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 for us as a business, these these 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 us sort of assess top approach. We will we want to work with the consultancy businesses, the banks, investment managers, the pension funds, except to say right here is a Yaris, a piece of technology that's going to help you do your work a lot better, and we will support you in skilling 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 an independent verification. So in the first instance, it's about working with partners that want to open up a new opportunity. And you say this line to their clients, but absolutely, we've we've working directly with the number of of large corporates and those interactions have typically come have quite a diverse range I guess from an ESG head of ESG in a company to personal relationships with CEOs know couple through it's we've had conversations interestingly with banks, lawyers, consultants, investment managers you name it a wide variety of of different companies.

Paul

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

Philip

That vital question that, you know, I think our 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 see as a something you just have to do, because you've been told through 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 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, that happens to this day and this will change as well.

You know, consumers are starting to vote with their wallets. And so, 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 product from company A or B, So so commercially understand that consumers are starting to choose where they buy from. Secondly, you know, you you're in a position to have an enormous influence.

Have you supply chains to help you with supply chains improve how they do things? Look at new 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 add to that point, the SDGs are a wonderful framework to tell stories for businesses. So not only the bad you know, so companies need to look afterwards and say, Hey guys, this is how we 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 look at what you are doing in other areas and 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 environmentalist 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 that constantly looking at new technologies and ways to improve and minimize their impacts, I think we all agree that we as a species, we are going to keep extracting for some time to go.

You know, we are still going to use fossil fuels. We are going to try to look at alternatives, but it's not going away. So let's not hammer them constantly. It's helped them to do what they do better. It's keep the pressure on. But you know, new 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 do.

And that's what we like about the SDGs, is that we can sort of articulate, yes, we're going to come short on 13 on company action. But you know, by the way, I wouldn't be going to single countries and why 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 on, you know, SDGs three, four, five, eight, you name it, that is 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.

Paul

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

Philip

One particular bank? We've just finished a work with not to to any bank you can imagine. It's going to be peace, just as 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 have an enormous influence on industry. But of course as as a business, they also need to articulate what's key to to what they do.

And what you find is a lot of businesses are doing wonderful staff internally with stuff, particularly post COVID, incredible stuff companies are doing for staff They're also doing a lot around CSR. So passion projects and this particular bank has got a variety of incredible stuff they're doing and all over it, 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 SDGs

So an important process is to put out that information, say, Hey guys, this is you doing a great job, but you're pushing energy to something that's really not quite your business. Wonderful CSR project, but let's sharpen the pencil It's rather let's rather take the shotgun approach to CSR and it's holding around impact as close to what you do as a business.

So for example, if you are a bank that does has branches all over Africa, for example, 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 in terms of impact. Are you helping bank the unbanked or is it all about the hybrid with offshore you know, those sort of examples, Right.

So but so yeah, you know, banks should also do well on governance. That's but otherwise they're in the business so that's that comes out key and then everyone's very different attest that you're a somewhat passionate about the environment and for example Jersey SDG 14 will be front and center everywhere in science because we are not it. We are surrounded br sea. But is it a core to a bank doing business in Jersey?

No, no, no. It's not a it's not a core SDG. So let's let's move it into important perhaps because some of you passionate about and want to make a difference.

Paul

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

Philip

Yeah, yeah. Paul your spot on. And I think that's an important point you make. The baseline is key. You know what our message is this and you don't have to go out publicly in year one 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 in an internal assessment.

Get it, get an outside opinion. Let's gather data. Let's see where you are. Let's help you refine what your focus is. It's identify how you score your costs across those SDGs particularly the core and important based on it. And then set of strategy and KPIs. Okay. Right. What is the plan and this sort to measure how we do across that over time and then slowly start to put out the good stories as well as that Very important.

Hey, hey, hey, society, this is how we do it.

Paul

Do you find it a challenge that perhaps the standardization doesn't exist today, as perhaps it could? I mean, this one client have a ESG impact assessment that looks like a and somebody else has no one is. It's like, is that a problem in in the industry at the moment?

Philip‍

I think if there's a there's a subjective approach to writing your own internal impact assessment report, they're going to be very different. So they all the sort of general reports added on to financial statements that are all going to be quite broad and not 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, ESG, got Global Compact, TSFD acronyms, go on IFRUS 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 question. So you can imagine there's thousands of questions now, and we've used the technology to take you as a business can select which are the, the, the standards you want to measure against.

And we then those are we've aligned all of those standards across the the SDGs the same plus the E the S the G right. So consolidates and simplifies and reduces the amount of questions you're going to answer to a much more manageable number.

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 does frameworks does that allow you to gather information which is useful and you could push out a report on that information, but it doesn't answer the So what?

And that's the next step. That's key is yes, we we gather the help you gather the data and we've got a central repository and you can support, etc., but it's very much now what?. And that's where the impact assessment comes in and that's where the exchanges provide the framework to do that assessment.

Paul

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

Philip

That's going to be the challenge is that not many businesses are forced to be short term reporting compliance, particularly to companies. And that is a problem. You know, what ultimately drives behavior and businesses? It's going to be budget cycles, but it's performance options, etcetera, etcetera, and that that has an impact on what people are prepared to do when they're prepared to spend money as well.

Yeah, So that's part of our 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, we're going to have a much bigger impact on the business?

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

Paul

Yeah, I'd imagine that the culture and the behaviors actually within the organization is 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.

Philip

For sure, Your your culture is going to be very important. Look, you've still got to you still have a large anti ESG movement, the whole sort of it's all nonsense up there. It's you've got a lot of greenwashing that's taking place and 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 that's going 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 five or ten years in a business. But to think about the legacy for for all the stakeholders of society, our employees, our shareholders, and importantly, society, which includes us as families and our children.

Paul

Yeah, it's changing. I think there is it's evolving quite quickly as we are 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 think of waking up to the idea that there's more to life than commodities and stuff and status, big houses and big cars.

Philip

Yeah. I think to just to add to that Paul we probably read the book Green Swans, which I'm busy working through at the moment, a fantastic one of.

Paul

One of many on my bookshelf. Yep.

Philip

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 were taught to design and nobody designed businesses to end up where we are. That was just. But it's a function of, you know, 100 years of of capitalism that's both scalable 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 the story rethinking our business models and how we how we do things that are build the planet is not take away from the planet. I think there's no doubt that this doesn't mean we were sort of as a species. I think we can very much be building and growing, but just rethinking how we do that.

Paul

Yeah, absolutely. And I think that people want to do the right thing. I'm oftentimes just unaware of what 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 is having on the environment, for example, more than even themselves. So, yeah, you know, so ESG, ESG, environmental, social and governance and SDG, the Sustainable Development Goals don't just belong in business.

Do they not actually belong with us as individuals in our lives?

Philip

For sure. You know, obviously as a business, we see the opportunity as a business, but obviously to draw the biggest impact to work with the corporates. And I must stress this is not a you know, let's come down harder companies and drive transparency and accountability, but it's also helping them. So let's help them on this journey, educate, etc..

So the capital or as we know, perhaps the biggest contributors to the impacts on society. So we've got to start there. But of course around that, you've got governments we need to have conversations with. Governments 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 of of the

Big businesses. And often I think people out on the street, things won't have much of an impact. But it's not true. And I think each one of us individually do little amounts. The power of compounding is enormous. So it's about thinking simple, as you know. What do I do? From a recent perspective, If I have the choice to add my bicycle to work to do that?

Should I take the bus instead of a car? Do we need two cars in our household any longer? And you know, my kids, which are young adults now, wasn't 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. That's not buying secondhand clotes. I think that's one large brand. We said recently, second hand stores. But they saying, hold on a second. Two things. One, let's not buy the cheaper nasty clothing. It's far better quality. And secondly, let's let's resell it. My my youngest child is the eco captain at her school, and she held a day where kids could come and swap clothes.

It said, thank you, port of your clothing, you know, composting, for example. We're recycling this much to do is individuals to just consciously think about our impact. I have a colleague sits next to actually this is the summer holiday. He's decided to challenge himself for going on holiday by train instead of flying. You know, obviously the likes of Europe, it's a lot easier to do that.

But I think what a wonderful way to travel. The property is better, easier at the moment, less cancellations and 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 if we collectively start to challenge ourselves around how we live, it's a great start to how we purchase our goods and how we spend our money, for example.

Paul

So what is the biggest challenge, would you say then? What's your biggest frustration? Would you say Philipt with, say, the strategy impact assessments?

Philip

Yeah, the biggest challenge for us right now is getting people to understand what it is that easy to do, why they have to do it. You know, technology has come a long way in simplifying, consolidating, demystifying this whole space, but it's still very much a human element. But we're not doing it 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 there 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 to work with the partner consultancy business, for example, they would have access because they're going to do it on other with themselves. But we give access to certain individuals within a corporate, for example, that can be responsible for inputting data. Now you can imagine, yeah, when do we see a heavier lift? But of course, once you've done it the first time, you've got a system going and you can upload throughout the year, don't rush towards the end of the year.

When are you going to do an assessment, gather data as and when you come across it. So, so year one's always going to be harder to to gather the data. But of course, as you say, you know, why don't you? The date is very important. That's where you are currently. The verification of that data, it's 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, to get certificates, information, because 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 these people tell him they do, but he's not actually what's going on. So so your third party verification is is very important for data gathering. It is it is a heavy lift, particularly in year one.

Yes. I think in time it's going to get quicker and quicker. Yes. The use of of machines, machine learning, etc. will speed up the process as well. Okay. So that's you know, that's pretty much it. Our journey is a piece of technology that's largely Part 2. One is is the articulating your ESG framework is SDG framework what a course to use etc. which drives a push strategy your KPI us your next big party is the gathering of data and then of course you move into the impact assessment part, which is the is the real sweetener.

Paul

Do all employees input into your system or not? Is it managers input on behalf of employees?

Philip

Correct. You'll have designated senior individuals, right? This is not your this is not a yeah. I mean, there's a lot of information. It's obviously going to remain confidential as well. So within within your organization, it's certainly information that would be available. So we need to pretty much manage that is access check.

Paul

And have you seen that the the the assessment of the output of the system drives the strategy for a company afterwards?

Philip

It's still early days. What I can say is the response from companies has been amazing sort of thing for a lot of these Exec of a business for example, have gone, Wow, I didn't realize what this all meant. First of all, with I've learned incredible amount about the space, they've embraced the potential of it. There's been constructive debate around board and secondly, they're now visually.

We give them nice visual dashboards that show them the SDGs and where they're scoring. And you can say, Hey, guys, look at those. These two out of your five course, SDGs aren't too great, but the other three are perfect. Fantastic. Well, this has put a plan in place for those two that will move the needle quite quickly. So it's opened up a whole new world to to you executives in a company that are very much focused all day on delivering what they do.

Right. And this is, you know, just to add to that, I think across across the business from the top to the bottom, it can add a lot more meaning to two people in a business. You know, this is if you can if you could show your whole business through the lens of the SDGs, you suddenly get a different picture of your company.

But yeah, this is my, my, my, my job every day putting in this data into the spreadsheet. It has a meaning. Yeah. You know, we, 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've seen that responsivity finished.

Paul

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

Philip

That's been a pleasure chatting to Paul and thank you very much for the opportunity and just great to have. Thank you for your work. I think these podcasts are important in educating everybody out there of why we need the SDGs. So thank you.

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