The Business Case For ESG
“Let’s get real”, says Daniel Jeczmien, co-founder and CEO of Omnevue, an online ESG accounting platform. “ESG is not about saving the planet. It’s about using new datasets to drive investment in businesses that have longevity – sustainable profitability.
Jeczmien should know. The businessman began his career in marketing, as did his co-founder, Dr Marc Lepere, the Lead in ESG & Sustainability at King’s College Business School in London. Lepere last month, in an article for The Conversation, called ESG ratings on investment funds “meaningless”, pointing out that they refer to ESG risks to profitability rather than “the risks that the company poses to the environment or society.” And it is common knowledge among investors, says Jeczmien, that ESG due diligence is often slapdash. A senior source at a London consultancy separately told Impact A.M. that investors, corporations and advisory firms have a “vested interest” in “banging on about ESG because it makes money or because its positive PR.”
For this reason, Jeczmien recently changed his company’s name from ESGgen to Omnevue. “We’re not an ESG company, we’re a non-financial accounting company”, he says. Omnevue is not there to moralise or sing sweet nothings about saving the world, and “that’s something that really separates us from a lot of other competitors in this space.”
Omnevue, he says, gives firms oversight over their non-financial impact. What they choose to do with that information is up to them, but there are two good business reasons to pay attention.
First, it is clear that regulators are taking an active interest. Jeczmien compares the situation to the Great Depression. That crisis revealed that many companies had been too creative with their accounting, prompting regulators to give rise to the structures that later became the Generally Accepted Accounting Principles overseen by the International Financial Reporting Standards (IFRS) Foundation. The looming climate catastrophe is similarly prompting regulators to look at reliable ways of reporting a company’s environmental impact. The IFRS has set up the International Sustainability Standards Board for this reason, while the EU is expecting 24 million small- or medium-sized businesses to report on 21 non-financial measures by 2028 at the latest. Sensing the way the wind is blowing, investors increasingly want high quality information, too. Omnevue was born after British venture capital funds approached Lepere, asking for a way to measure the sustainability of their investments. Soon, says Jeczmien, a business leader will need a holistic overview of her impact on the planet to simply stay on the right side of regulators and investors.
Second is “business performance”. The non-financial accounts can reveal pertinent financial information. One Omnevue client was surprised to learn that their CO2 emissions had gone up by a factor of 10 from one year to another, and pleased to find a solution that saved them money as well as emissions. They had begun exporting to the United States that year, and were sending items individually from the UK. Setting up a distribution hub in the US, which they supplied with a smaller number of larger deliveries, cut the company’s CO2 emissions by 80 per cent.
Being a socially conscious employer, meanwhile, is good for employee retention and hence also for the bottom line, he says. “The cost of losing talent is very expensive for a business. It’s not only the cost of rehiring fees, but it’s the cost of not having somebody do the work, having somebody else cover the work, having to onboard somebody for three months until they become productive … So you now realise, ‘oh, losing a person actually cost me in aggregate £50,000.’” Much cheaper in the long-run, says Jeczmien, to redress pay gaps and invest in making employees feel valued.
But is this really about ESG? Is this not simply good business sense? “So, that’s around non-financial accounts”, says Jeczmien, returning to his point that Omnevue is not an ESG company per se, though you could build an ESG strategy with its reports, if you wanted to. “I think you’ve got to connect the dots beyond saving the planet. And you’ve got to show CEOs that doing that is actually the right thing to do from a business perspective first. That’s the way the economy is structured.”
Perhaps unexpectedly for an entrepreneur, Jeczmien describes himself as “pessimistic by nature”. He is certainly a realist. “I’m just going to say things as they are: To drive change in our current world, you need to move the money world.” With regulators paying ever more attention to ESG and its measurement, there is an opportunity for companies like Omnevue to make some money themselves and do something good along the way.