Jason Nachamie of Rho Impact: the art and science of ESG impact tracking

Jason Nachamie of Rho Impact: the art and science of ESG impact tracking

Understory Team
Understory Team

Are you or your business on a collective journey toward a more inclusive, sustainable, and equitable future? In this episode of The Understory Podcast, we dig into the planning, tracking, and reporting process for your organization’s ESG strategy and why it's important to take action now. As climate change and social inequalities continue to intensify, Rho Impact works to democratize and scale access to ESG expertise, tools, and networks.

We are joined by Jason Nachamie, Senior ESG Advisor at Rho Impact, who explains the company’s mission to empower every organization to take environmental, social, and governance action. Their purpose-built software and modelling tools allow companies to engage and build consensus with their stakeholders through data transparency for ESG reports and regulatory bodies. Implementing ESG initiatives is important not only to meet regulatory and investor requirements, but it also drives a competitive value proposition.

The Understory Podcast is also available on SoundCloud, Apple Podcasts, Amazon Music, and Google Podcasts.

Episode Transcript:

JJ (host of The Understory Podcast): Hi, welcome everybody to another episode of The Understory Podcast. Understory is a global community of innovators, entrepreneurs and organizations that are trying to help our world to become more sustainable and climate-friendly Today, we're excited to have Jason Nachamie, who leads consulting at Rho Impact join us and kick off our February conversations about sustainability, ESG, and so forth. Jason welcome to The Understory Podcast. First off, tell us a little bit more about you and Rho Impact.

Jason Nachamie: Sure, very excited to be on today. My name is Jason Nachamie, and I'm originally from the New York City area - a small town called Brockway Beach, right on the ocean. These days I live in Vermont, and I consider myself more of a Vermonter than a New Yorker. My background is in the startup community, but I quickly transitioned into the sustainability space because I saw there was a drastic need for change.

With our climate transition, I realized that there's a big business case for sustainability. Now, my expertise lies in the ESG space, particularly around sustainable business strategy, impact measurement and management (or IM as we call it), and regulations. I've been working with a company called Rho Impact, and we're a tech startup that uses custom software and data analytics to support our bespoke advisory services. We help our clients create and formalize an ESG strategy that's designed specifically to fit their needs. We provide services on everything from materiality assessments to reporting out and everything in between.

JJ: Interesting. You mentioned ESG regulation and a few other things. If you don't mind, maybe walk our audience through what you are seeing with your clients on the ESG side? Or what are some of the biggest challenges? What are some of the biggest questions or the most frequent questions that you get?

Jason: The ESG space is pretty amorphous, and I always take a step back and explain that. The movement began with the CSR movement, corporate social responsibility, where businesses felt the need to take responsibility for promoting a positive impact. ESG is the next iteration of that. It's also focused on the commercial value that it can provide to the business. A lot of times we hear from our clients that ESG doesn't apply to us, since they are not a sustainable business or their investors aren't asking for ESG yet. We want to make it clear that, yes, ESG applies to everybody, and there are a lot of regulations coming out of the SEC and from NASDAQ, for public companies and for private companies in the US. The EU, or the UK, have all released regulations that encourage businesses to report on their environmental, social and governance aspects for more transparency for these businesses. With that, we always tell everyone that, yes, ESG has a commercial value for your business as you can use it as a competitive advantage and a way of managing risks. We saw a lot of supply chain issues this year for different industries, and each day is a way to manage those issues. We also want to show that doing so creates benefits for your business that generate positive impacts on society. It’s all about using your business as a means of creating good while also using it to benefit your company and push your product or services further by having that kind of sustainable value proposition.

JJ: In your work, Jason, do you talk to your clients differently when you talk about E versus S versus G in ESG and talk to the same people in the same organization or do you have different approaches in tackling each element of ESG?

Jason: Ultimately it depends on the client and their specific goals. It depends on the industry and the shape of their operations, but the E,S, and G needs to all be balanced equally because they benefit each other in a way that If you focus only on one versus the other two, you're going to be missing a lot of aspects of a strong ESG strategy. There's going to be holes that can be poked in it, and that's what we're trying to avoid.

In the environmental aspects, you're obviously focused on carbon emissions, water waste, things of that nature that directly impact our natural environment, and then social is the way that you manage your human capital the way that you interact with your stakeholders, including your customers all the way to your investors and everyone in between, and then your governance is how you manage both of those aspects.

How are you structuring your business so that everyone in the company understands your values and your mission and are aligned on using the capabilities that you have internally to promote that impact externally on the E and the S factors.

JJ: One of the things you just mentioned which is interesting is balancing the E,S, and G and for the organization to capture the full value, they have to think about all elements. What have been some of the biggest challenges you have seen? From your clients or just as a domain expert in this space in terms of how organizations are trying to balance that. How do they wrestle with each of those elements and how do they tie together? How do they organize themselves internally and with their capabilities?

Jason: That's a great question. It's interesting because sometimes you'll find companies focused solely on the E aspect, and then they leave out the S and G, which can result in issues later down the line. Other times, you'll find companies who are focused exclusively on the S side of things, where they do a lot of corporate philanthropy, a lot of volunteering. While all of those are great in isolation, they don't create the impact that we're looking for here. There needs to be an equal map balance in measurement. One of the biggest challenges with that is using data to your advantage, based on your current efforts, understanding where your current emissions lie, understanding your diversity, equity and inclusion mix and using that data to baseline your efforts and understand what areas you want to focus on more. Some areas where you might be exceeding and others where you might be falling short and how to bridge that gap, so that there's a nice equal balance across the board.

JJ: Let's talk about something that you mentioned a couple of times, which is about having the data to be able to drive the analytics and to make this very data driven. What are the kinds of data that exist out there for companies to understand their ESG? Is it mostly internal data? Is it external data, other data, that is dark data, meaning trapped and people don't know they exist but could be used? What sorts of things are you seeing on the data analytics side for ESG?

Jason: The data aspect is interesting because it runs the gamut. There's a saying that we always use that you can't manage what you don't measure and realistically, there's data for any kind of impact metric that you are interested in tracking. It's just a matter of getting creative and understanding where to find that data. Most times it does live internally. For example, environmental data specifically around climate emissions and water use and waste. A lot of that lies in utility bills and it's just a matter of going in and making sure you can find the right data point and organizing all that data accordingly to run the right calculations. Then with your social metrics, that becomes a little bit trickier because you need to get creative on how you're measuring things like stakeholder engagement and employee engagement.

Like I said, your ESG metrics require you to get a little creative and make sure that you're searching in all the right places. For example, with emissions, you have scope 1, 2 and 3. Scopes 1 and 2 are more internal, but scope 3 refers to emissions created by your supply chain and your external partners. That could be a little bit harder to find because you're going to have to go to your suppliers and you're going to have to ask them for that data. But the point that we try to stress to our clients is that all of it is available. It's just a matter of making sure you can gather it, locate the right data point, and organize it. The important aspect that we focus on, as well, is that all of the data needs to be validated.

By providing a link to the PDF, where that utility bill lies or having a list of your employees, you see where your ESG statistics came from and that validity is incredibly important. Because, with the amount of greenwashing that's been happening in the industry recently, you want to make sure that if any of these regulatory bodies or if any customers or investors are looking at your ESG reports, they can see this data. They can see where you gathered it from. There are some descriptions behind the efforts that were used to collect and use this data internally, and they can understand that, OK, this data exists, it was found here, it's valid and it's auditable.

JJ: You talk about something important, which is being able to validate. Is that something that you do on behalf of your clients? Because you are the third party, you're validating those or is it the organization themselves providing those and self-validating?

Jason: We don't focus so much on the validation but more on the fact that we help these clients locate their data and we help ensure that whatever they're reporting on is auditable by a regulatory body. We're not one of those regulatory bodies, we don't audit ESG reports. But, we'll make sure that if we're helping a client produce an ESG report, the necessary data is provided and linked to it so that if someone were to go into their reports and look under the hood, all of it is there and it's ready to be investigated. There's not going to be any holes in it so that the SEC can't say, hey, this data point is invalid. Our job is to make sure that every data point included in an ESG report comes from somewhere internally. It's not just pulled out of thin air.

JJ: For the audience, when you say the auditors and the organizations that audit, who are they today? Because yes, the reporting is not required disclosure, at least for today. For public companies, this is something many companies still do, but is not a required piece of information, so who are the auditors, the downstream partners to Rho Impact?

Jason: It's interesting because ESG reporting and non-financial disclosures, as the SEC coins, are becoming mandatory this year and so public companies are going to be required.

JJ: Each one is, right?

Jason: Correct, yeah. The SEC has enacted their climate task force, and they have expanded their definition of materiality to include non-financial disclosures which include ESG. Public companies need to start including information in their 10-Ks. The NASDAQ has asked everyone to start reporting on their board diversity and their executive diversity, which is in line with their 10-K's and their financial years. These regulations are becoming more and more widespread and are going into effect this year. It will be necessary, but as far as the auditors go, the SEC in their task force has already launched several investigations, Allbirds, being one of them. We see Allbirds as this nice unicorn startup that has a great sustainable value proposition, but their emissions data was faulty. The SEC investigated them and found there were several holes in their data.

The regulatory bodies that tend to investigate are mainly the SEC ensuring that if you're reporting on something it's got to be accurate. You can't be putting out these false claims into the world to try to generate an advantage around them. ISS, Institutional Shareholder Services, is another one that is more of an auditor and a regulatory body where they issue ESG scores based on the information that you report. That's another form of auditing and regulation. Not only does ISS exist, but also MSCI as well. There are many, such as Morningstar, which has launched their version of this, where a number of these bodies provide ESG ratings and rankings or risk scores to these public companies based on the information that they're reporting. If a company were to put out an ESG report, all of those services and bodies are going to be looking at it and taking an analytical eye at seeing what's up with their data, how accurate is it, and are the claims supported and substantiated.

JJ: Yeah, that's important. I'm so glad that you pointed this out to our audience. Last question Jason, for organizations that are on this journey and they want to learn more about what you're doing, how do they reach out to you and find out more about Rho Impact?

Jason: Absolutely, our mission here at Rho Impact is to democratize access to ESG. We want everyone to be enabled to do this kind of work and to do it the right way, to set it up so that internally it's benefiting your company and in doing so, you're using those capabilities to benefit society. We need widespread action here, the more that we can get on board with this, the better the people are enabled. It's not just about working with us.

If anyone ever has any questions, we're always happy to provide friendly conversations and consultations on what they should be doing, even if they don't want to take the next step in working with us. With that being said, you can find us at RhoImpact.com, our website and on LinkedIn again at Rho Impact. Feel free to message me directly on LinkedIn. I'm always happy to have friendly conversations with you to unpack the ESG space, understand what's going on, what regulations are coming into effect, and what they can do. From their side of the table to make a difference not only for themselves but for everyone else, all the stakeholders that exist externally.

JJ: Yeah Jason, I think that's great. As you point out, a lot of things are happening in the industry and we should talk again, probably at the end of 2022 or the beginning of 2023 so that we can talk with our audience about what you're seeing again throughout this year. As you say, lots of activities, both on the regulatory bodies and what the organizations need to do or should be doing so.

Jason, thank you so much again for joining us and we look forward to seeing more of your impact and helping our world to become more sustainable. Thank you for offering to our community to be accessible.

Jason: Absolutely, thank you so much for having me on and I look forward to catching up again soon.

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