Corporates are having a hard time at present with the myriad of pressures they face. Corporate Social Responsibility (CSR) is but one of these and pressure is rapidly increasing for corporates to report against progress in meeting their goals. Yet setting such goals and finding ways to deliver them is confusing, complex and time consuming. New innovations in technology may be the solution.
CSR reporting focuses on a corporate’s triple bottom line – financial, social and environmental impacts. A good story needs to be told if they are to maintain support from shareholders, customers, stakeholders and supply chains. It comes down to a simple measure: is this company a force for good in this world? Tackling climate change is part of this, and whilst there is much for businesses to do internally in order to reduce their carbon footprint, it is often too difficult without risking adverse impacts on their core business. For example, a cement production company might one day be able to run a net-zero business, but in the meantime it needs help to make a positive impact on climate change. They could buy carbon offsets to sequester carbon in massive forestry projects in Scotland or solar energy projects in Kenya, but these have no direct impact on those communities in which they operate or in which their customers are active. Connect to these groups and they then create opportunities to elevate their core business.
There is a potential solution which would be of significant value to corporates, but it requires developers of low carbon solutions to step up and work with property owners (e.g. councils, landlords, housing associations, SMEs). Yet if successful, this approach will not only gives corporates a big helping hand in achieving their CSR goals, but also unlock valuable capital so desperately needed to get low carbon projects started.
The concept implements a two-step plan.
Step 1 – Formulate Inputs
Developers create bankable projects to attract impact investors who can offer seed stage investment (e.g. by buying green bonds) through innovative business models (think revenue opportunities from renewable production, electricity storage and energy usage), project scaling (think aggregation) and reducing investment risks (think self-administered due diligence).
Step 2 – Formulate Outputs
Developers formally identify the carbon offsetting capacity of their projects (no matter how small) AND create a narrative about how their projects will positively impact local people and local communities in terms of economic, social and environmental benefits.
Step 1 is aimed at attracting investment which fuels Step 2, and this offers corporates the benefits they need in order to buy Environmental, Social and Governance (ESG) sponsorship packages as part of their CSR programmes.
Bringing all this together would normally be a challenge too far for both developers and corporates. Technology in the form of blockchain (not crypto currency) provides the solution, a way of simplifying multi-party online transactions with easy-to-use software. Developers present their projects for investment and sponsorship, while investors and sponsors search for suitable projects. The clever part is to break projects up into tiny bits of value. Similar projects (split by target users and/or location) pool their values which are then digitally ‘chopped up’ into bite/byte sized pieces and loaded into digital ESG tokens – small programmes which record their allocated value and associated project details.
All the corporates have to do is to buy as many tokens as they need in order to have the optimal impact on their CSR goals. But that is not all. What if they could distribute those tokens to staff and let them choose where to invest? And what if each token committed to a project was then transformed into a digital discount voucher (branded by the corporate sponsor – imagine Sainsbury’s sponsoring vouchers) for allocation by developers to potential end users (such as low income tenants) in order to incentivise them to commit to low carbon solutions? All of a sudden, different parts of an urban community are connected and helping each other.
For low carbon project developers, they now have a new source of funding from corporates, even if these funds are routed through end users. Rather than just pocketing this, the funds can be used to directly service the interest payments of the seed funding secured from investors. Sequencing such transactions builds trust in investors and sponsors, adding value to each project. In this way, each token becomes a critical component in project value chains, connecting corporate sponsors, investors, end users and developers.
The benefits to corporates are significant. Not only can they report that they have made a positive impact on local communities (improved energy resilience, new jobs, easing of fuel poverty, etc.) but they will have offset some of their carbon footprint, enhanced their brand, promoted themselves through local engagement and improved staff satisfaction. All this from buying some tokens.
There’s an economic revolution taking place for multi-party transaction systems such as this. Companies such as Accenture are creating strategic alliances to break down the data silos of existing highly manual systems. Trading relationships which were previously impractical can now be pursued. Underneath the bonnet of these systems is blockchain, so powerful it will enable members to share data and connect their separate solutions in a collaborative, interoperable environment, with the mutual goal of conducting business operations with greater speed, less complexity and less risk. Blockchain + tokens + vouchers: that’s a powerful combination.
Imagining this as a solution to both corporate CSR pressure and capital shortages in low carbon project pipelines has happened. Its delivery is on the horizon and PyTerra will endeavour to play its part.
© David Arscott September 2021