The Sustainable Finance Podcast: Engaging the C-suite in ESG

The Sustainable Finance Podcast is a weekly program featuring conversations with sustainability thought leaders such as cleantech entrepreneurs, VC investors, CEOs, NGO executives, and creators of the ESG indices and analytics platforms. 

EPISODE 251: Is it Really Over for ESG?

Marjella Lecourt-Alma is the CEO and co-founder at Datamaran, the only software analytics firm in the world that can monitor external risks and opportunities (including ESG) in real-time. Marjella and the Datamaran team believe that companies who care about their success — in an ever evolving world — incorporate material ESG risks and opportunities from the top down. 

I interviewed Lecourt-Alma about the future of ESG reporting and the biggest challenges businesses and organizations face, and how ESG software and AI can accelerate the gathering and reporting of ESG data and set a business up for success. 

Paul Ellis: Marjella, the regulatory pressure on ESG has increased dramatically with CSRD, CS3D, California bills, and the U.S. SEC climate disclosures. Are these regulations adding to the bureaucratic burden and getting in the way of achieving real world impact? 

Marjella Lecourt-Alma: It’s a very good question, Paul, and I think initially a lot of folks working in the field of ESG were of the opinion that regulations wouldn’t be what we needed: as in regulations will lower the bar instead of making companies ambitious as it comes to their ESG strategies. Interestingly, I think the opposite is occurring. So I would say regulations are our unexpected best friend at the minute. 

These regulations are actually pointing the finger not so much at compliance, but really in terms of government governance, in terms of ownership, in terms of leadership. So when you look at the regulatory developments, whether it is CSRD or CS3D or the U.S. SEC Climate Disclosure Act, all of it is about understanding when it comes to these new issues, these new business risks and opportunities, who’s actually in charge? Who’s driving this? How have you set up internally your governance system?

It’s asking questions about how companies are getting organized around this rather than, I think initially, the expected box ticking exercise. Once it gets to regulation, we get to the boundary of boredom and it gets to the check the box exercise and actually the opposite has occurred. 

PE: Can you share an example at Datamaran without giving away any secrets about any of these regulatory platforms that you’ve encountered? 

ML-A: Actually, a lot of our clients are new clients, coming to us because of the regulatory pressure. And what has happened within these companies is that new leaders are getting involved. We’re seeing the General Council or the CLO appear, we’re seeing the CFO appear. So there’s an interesting new collaboration happening at the C-suite level. 

Also, in trying to answer to their board members and, of course, investors on what they’re doing in terms of ESG, the first question they have is: Datamaran team, how can you help us get set up for success? What do we need to do in terms of our governance? Who do we appoint?

And yes, we had a CSR team in the past, but this team was involved in our CSR report, and they were involved perhaps in philanthropy. But not so much in business strategy. So it’s C-Suite members realizing ESG is a governance issue, and it’s an opportunity that is being presented to ESG leaders or CSR leaders or sustainability experts that have been on this for many, many years to actually step up and take a strategic role. And I think that’s also very exciting. 

PE: Thank you so much for sharing that. One of the complaints that we’ve been hearing for several years now as we have been anticipating this regulatory infrastructure development, is that the C-suite were not getting engaged and were handing it off to other parts of the business infrastructure. But what you’re saying, it sounds like just the opposite is starting to happen. That’s terrific and good news for Datamaran and lots of other companies as well, right? 

ML-A: Right, finally. But it is happening. 

PE: That’s great. Glad to hear it. Now, what other external pressures are business leaders facing regarding corporate sustainability and ESG and what internal obstacles businesses must overcome to build successful plans and achieve their goals? 

ML-A: Thank you for your questions. I think in terms of the first one, the external pressures, I would say there are two main things. The first trend that we’re seeing is that everyone is asking, a lot more people want to understand what companies are doing in terms of ESG and how they define it. 

You know, there is no ESG one size fits all, so it’s very much about companies getting ahead of it and trying to articulate what these issues mean to them and what are the issues that they are prioritizing. And they’re getting these questions across the board into multiple teams. Investor relations also being an obvious one today. And there’s also results in the ESG team, or the sustainability team needing to show up everywhere to help answer these questions that are, that are coming to companies in a much more frequent way. So we see clients talking about the need for becoming more agile when it comes to answering these questions around ESG issues. 

Another external pressure I would say is around finding and keeping the right talent for companies. So of course, we all know that Gen Z is very different from previous generations, and more aware of what is happening in business, much more mindful of the environment and lifestyle and food, and also much more interested in getting this information straight away. So if you want to be attractive for new generations, the new talent that you want to attract to your companies, you have to have your story straight. It has to be compelling and it has to be up to date. You have to be in conversation with these new generations. 

In terms of the internal obstacles you talked about, I think there’s really only one main internal obstacle that makes action on ESG difficult, and that is really about communication. So you might have your ESG team that has a very specific interpretation of what ESG disclosure and ESG strategy might look like. Now, what we’re seeing today is that this has become a matter of the C-suite. These people are getting involved, they are responsible, they have to take ownership.

And this is where we often find a literacy gap, not just with C-suite, but also with board members. 

And this is where I think everyone is playing catch up: They’re thinking, What all this stuff is about: How do we make the first steps? And oftentimes what we see here is that before they make the first steps, they first have to pause because they have to learn, and they have to understand what they don’t know yet.

PE: That’s a very good place to enter the discussion of our next question. And that is, what role does technology play in overcoming these challenges at the C-suite level and all the way down to the folks who are doing things day in and day out to make sure that the company keeps running the same way and keeps making progress? 

ML-A: Sure. I think the role of technology is pivotal here. On the one side, addressing of course the ESG skills gap and literacy gap, I think there is a role for technology companies to play to help scale expertise. And that’s how we’re looking at Datamaran. We’ve been building out use cases related to data-driven materiality, double materiality, and ESG risk monitoring that typically consultants would do, or an in-house team. So a technology player can help scale expertise that is currently not readily available in the market, and see how technology can be best tapped to do that. 

So we use AI, generative AI, all the new technologies available to make that happen. Also, I think in general, every well-respected business function today should have a tech stack. And then, in terms of using technology, to get perhaps more confidence in your decision making around ESG when you use different technologies. And especially the ones that we use, you’re able to analyze more data faster in a more applicable way. 

I think that one of the great benefits of leveraging technology for ESG decision making is that you can analyze thousands of regulations, thousands of reports, thousands of media analyses that would otherwise be humanly impossible. So lots of benefits. 

PE: Now tell us a little bit about how businesses can leverage the advancements in artificial intelligence as well as your experience with your customers, because you work with many of the largest corporations in the world and they have large staffs that are focusing on these technology advancements. How is that going? 

ML-A: A very specific example is businesses, oftentimes ESG leaders, trying to evidence to their C-suite teams or their boards why certain decisions are being proposed. And if they can do that on the basis of the fact that this is a data driven practice now, rather than someone’s opinion, or a bunch of people’s opinion, that really helps drive the change internally. 

So if you have the evidence looking at the regulatory landscape, the media landscape, and let’s also say the reporting landscape as a proxy to industry trends, then you can present facts to stakeholders internally who otherwise might have said, that’s just your opinion. I think that’s where AI particularly is very powerful.

Another more recent example is that what we’re seeing, C-suite leaders especially would like to have more handholding and more contextualization of ESG trends. If, for instance, we’re seeing that business and human rights is becoming a very big theme in a particular country, they are not just interested in understanding that this is a trend, they want to understand why.

So gen AI in particular can be used to provide that narrative, that context. What am I actually looking at here? And I think for the longest time in our business, this is where we saw some limitations, and now with gen AI and those trends, we see an opportunity to press ahead and for gen AI to play more of the role of the consultant or the in-house experts that go beyond the graph or the table, or the data visualization into explaining what it means, and giving you the right context. 

PE: So gen AI is now becoming an accepted part of business on a day-to-day basis is what I think you’re saying, even at the C-suite level, in many companies. And I’m very excited to hear that. I know I’m way behind the curve in terms of learning how to use it myself. So how does smart ESG help business leaders build trust with investors? Because now we’re getting into the, the, the part of our discussion where we’re starting to talk about capital deployment, and that is ultimately, as we all know, the bottom line. 

ML-A: That’s a really good question. I think smart ESG also alludes to it being tech enabled. It would be obvious why Datamaran would say it should be tech enabled, but it’s even more so in the approach. If you are an investor, you very quickly understand that ESG is different from industry to industry, from country to country, and perhaps even very company specific. 

So, when you do ESG, right, and we call that smart ESG, you decide to focus on a key set of, let’s call it material, or let’s call them priority ESG risks and opportunities. But also, you are able to explain why you are deprioritizing a lot of these issues. I think there’s been a lot of backlash on ESG also because everyone was trying to do everything, try to cover as many ESG talks as possible and then hopefully we’ll end up high in all these ratings. 

And what we’re seeing now is with this focus on governance and ownership and leadership and making choices, that smart ESG is really about narrowing it down and then doing that part right. If that means for you that is climate risk, biodiversity, and talent retention, three issues, so be it. 

If you can defend why that is, and you can also defend why you are deciding to leave others behind, then that is your ESG strategy. 

Of course, one side note here is that there’s of course the regulatory aspect as well. So part of ESG is companies making judgements, and part of ESG is also regulations starting to mandate certain issues and, in terms of those issues, then they are of course material to all. 

PE: There’s a whole population that we need to integrate into this discussion: investors and stakeholders. How does TSMART ESG support investor relations and stakeholder engagement? 

ML-A: I think in terms of the investor and stakeholder engagement, smart ESG really helps business focus on the key issues that matter most. But also with SMART ESG, we’re essentially saying, take it in-house, make it your own. Do not outsource critical ESG matters outside of the business.

And once your investors and your key stakeholders understand that you have properly integrated ESG into the key functions from the top down, obviously that’s going to build a lot of trust because then there is an understanding on the other side that you have properly invested in getting the skills, getting the tools, and also getting the focus, making the choices that make your business successful. So, I think the biggest benefit of SMART ESG when it comes to investor relations and stakeholder management is the ability to insource it. And then, with a lot of confidence, being able to talk about it. 

PE: We now know ESG teams need ESG software in the same way that finance teams need finance software. This all makes sense. Where should businesses start on this software adoption journey? 

ML-A: We’re hearing that question a lot. I think the most important realization before buying anything is realizing that with ESG, you don’t need to do it all. And of course there’s going be stories out there in the public domain that are going to tell you that ESG is very complex and you probably need an army of people to help you with it. 

So our advice here at Datamaran is you don’t need to do it all. Start with prioritizing the issues. When ESG is truly a strategy, you exclude stuff as much as you include it. So start with that and then afterwards invest in data collection software. Invest in reporting software that will help streamline it all. But if you get the beginning, right, if you get that focus right, you will not need to collect as much data and you will not need to report out as much. So never start with data collection. 

PE: That’s great advice, Marjella. How can people reach you with questions about these topics? 

ML-A: Our website has a lot of information. And we have a LinkedIn community led by Lottie Hawkins, so you can reach out to any of us on LinkedIn. We’d love to hear from you as we’re as we’re building our community.

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