SPEAKER_02 0:01

Welcome to the Future Ventures podcast on Scaling with Clarity. Today I'm joined by Dr. Nisha Kali, founder and CEO of Corporate State. Corporate State. Nisha is a chartered company with a PhD in corporate governance and more than two decades of experience across finance, government governance, and perspective. Her work is built around a provocative video. A company can appear compliant on paper and yet still lock the systems and resilience to withstand real-world pressure. Through Core Stage, she is working at the intersection of ESG, financial discipline, governance, data, and AI. Nisha, welcome to Scaling with Clarity.

SPEAKER_01 0:52

Thank you very much, Max, for having me. Honored to be here. Looking forward to the conversation.

SPEAKER_02 0:58

Me too. Me too. It's um it's it it's it's an area that's uh um is bubbling up to the surface all the time. This week alone, two of our two of our clients are dealing with governance issues. In one case, they have a large group of 11 shareholders, and which of which 10 are board members, and then the other one is in it's in a formation, so like working through corporate governance, it's not simple. And so it's only through experience that you understand kind of like what are the things that you have to put in place versus the things that you can let go of. But but this is it it is foundational to the success of a company. So what interested you in corporate governance?

SPEAKER_01 1:48

Yeah, very good question. Yes, I was actually it uh I was actually asked, I I come from finance background, I'm a chartered accountant. Uh that's my first degree after you know undergrad. Um, I did this CA, and then um I got into academics, and that's when I was told to do, you know, if you uh to do PhD. And uh if I didn't do PhD, I wouldn't be allowed to teach, you know, at those colleges. So I registered myself, and uh uh in that time, like 2005 is the time when I registered for my PhD, and that was the time when people were talking about uh corporate governance and CSR a lot, and uh investors have started integrating these into investment decisions. So a question came to my mind that how does this relate to valuation? And uh all the more I was intrigued by the qualitative aspects of corporate governance at CSR and how do you value those? So my PhD was around uh how do we quantify the corporate governance parameters and then connect that or you know, empirically connect and draw conclusions with the valuations. So, does corporate governance actually impact valuations or not? So I studied six parameters around those um and the principles laid down by ECD, and then I found that value creation parameter got the strongest significance, and that's where my whole work related to corporate governance, CSR valuations, it started as consulting in back in 2008 when I finished my PhD.

SPEAKER_02 3:30

And so I'm I'm curious. I mean, you and I are both fellow charter accounts, although in Canada I'm not allowed to call myself charter account anymore. I'm a certified public account, I think it stands for. But what are the six parameters that you're referring to in terms of corporate governance? What uh it what is the acquisition correlation? Kind of like let's double-click on the science behind kind of like the what value does corporate governance drive?

SPEAKER_01 3:59

Absolutely. So uh, you know, OECD has laid down these six principles, and first of them is the board composition. So, how is your board composed of uh whether you have independent directors or not, and non-executive directors? Um uh how many um, and then then this second parameter is about the conduct of the board. You know, how do how does the board meet? Do they meet four times a year? Do they have enough forum? And um uh uh and in the composition, we also consider qualification and experience of the board members, etc. So these two these two are related to the board. The third one is related to separation of CEO and board, that whether CEO is totally you know, uh different um role or capacity and interesting research around that. That you know, if if the boat roles uh both like CEO and chairman of the board, they are combined, then it's faster for the company to take decisions. But you know, in American systems or Anglo uh Anglo-Saxon theories, we you know, we see that shareholders are dispersed, it's better to have the roles separated. Um so then uh the fourth one is the concentration of shareholding, and you see that you know, in particular in the Asian context, we see that a lot of companies are promoter-based, founder-based, and they still hold more majority of the shareholding. But what happens is with that, minority shareholders they get impacted, you know, sometimes negatively. So when a company goes in for merger acquisition, they just have the majority, they get acquired or they get merged with some other company, and the minority shareholders have no say in that. And also, you know, banks also sit on the boards of many companies in the Asian context again. Um where I mean, banks provide a lot of funding, loans. So they have a director in the board of directors, and and they have a seat there. So um, in those cases, what happens is minority shareholders, we have to see whether their interests are ignored or you know, how are they taken care of? So proxy voting, uh, and how do we conduct AGM, those kind of things are covered under that particular aspect, and then um it's about related shareholding, you know, how how how the how is the how does the company uh take decisions, whether there are conflicts of interest and those kind of things. And then the last one is the value creation aspect, whether you are considering all the stakeholders like creditors, suppliers, employees, communities. Um, are we considering interests of those as well? So, according to my research, the value creation aspect was the strongest linkage between a company's valuation and the corporate governance.

SPEAKER_00 6:51

Yeah.

SPEAKER_02 6:52

So if I understand correctly, with value creation, the more they focused on broad-based stakeholder consultation and identifying all of their stakeholders and focusing on uh value creation, the the better the corporate governance is.

SPEAKER_01 7:08

Yeah, yeah. Uh yeah. So the more you the more you engage with stakeholders, you take interest, take care of the interests of the stakeholders, the company is better valued because it's all about raw long-term resilience as well and long-term growth. Like if your stakeholders are not happy or their value is not created or they don't grow, then the company will have some kind of failure. Let's say, you know, if a supplier's interests are ignored, the suppliers won't deal with you. And we saw that, you know, if suppliers, let's say if we ignore the supply COVID times, you know, all the industries, all the companies around the world, they realize that they're, you know, all the manufacturing is located in China. And you know, um, so they did not diversify their operation, they did not diversify the supply chain, it was impacted a lot. So, you know, in that case, company has to focus on the suppliers and customers, and likewise, you know, you have to take care of the interests of all the stakeholders, and that's where EHG is connected as well, you know. Um, and it's like a natural stretch or extension of that value creation, it's a stakeholder theory, so that's a natural extension to ESG, and that's why I'm you know, I'm into this space of EHG.

SPEAKER_02 8:25

Yeah, yeah. So I have a question around ESG. Um, for two publicly traded companies in Canada, I was responsible for the essentially preparing the ESG or CSR report and and assurance. Um and back in I want to say 2015, 16, 17, 18, EFG was flying high, and as of recently, it has taken uh a bit of a backstage. Um, what's driving this? Um what what's driving this direction? Why is EFG not as important, or at least it does not have the same level of resonance as it as it once did?

SPEAKER_01 9:10

Yeah, it's basically um uh there are two two reasons I I give this. Um one is the myth that ESG is a cost sector and we are we are just incurring costs, it's not giving any value. And second one is economic factors itself, you know, when companies have priorities, uh different priorities. And it started with um um with tariff situation around the world where you know in 2025, early 2025, tariffs changed, and then um actually before that, even uh Russia-Ukraine war led to inflation in Europe, and that's where uh some backlash started, and um, and then Europe uh started saying that if other countries are not doing, why should we do in such a you know economic situation? So that I mean that uh those things started, and then 2025 terror situation came, and then again the war situation amplified. Um, so those kind of pressures really impacted ESG and companies when companies are today you know more focused on profitability. So when we go and reach out to our clients uh for the platform or for consulting, they say, How does ESG relate to profitability? What will I gain out of it? That's the first question. So we have to actually prove to them that you know these steps or this ESG, you know, what we call this ESG today, and back in 2008, I was talking, I was saying the same thing as value creation. So if you do these, I mean there are parameters again for ESG. If you do these, you will create value for entire organization. So there's business value in it, and that's um people don't understand, they they consider it as a cost. That's why I say it's a myth that you know they they think that it's a cost center. Why should I do it if it's a cost, right? So we have to educate, we have to amplify this, that it actually creates value, and the other one is actually creates resilience. So you stronger, um, I mean, as an organization, if you follow these, it's not uh just for compliance or just for reporting.

SPEAKER_02 11:26

Yeah, uh Nisha, which which letter in the ESG drives the most value for companies?

SPEAKER_01 11:32

Which part of ESG? Uh yeah, good question. Yeah, so um, I mean, given the current scenario or current situation when we're talking about climate change and actually temperatures are increasing and supply chains are getting affected, um it's E. But I would say again, if G is not there in the organization, E and S both are ignored, they will not happen. So G is the most important thing, and forget about ESG if you talk about AI today. So if you don't care, take care of the G part, AI will also not give you value. So first first, first I would say G is important, and then E and S, depending on the materiality of the company. How uh I mean uh what is the materiality? For example, it's if it's a people-oriented company like banking or service sector, then it's it's about S more. And if it's uh because banks hardly have an environmental footprint, right? Uh, unless they are they are funding oil and gas and other industry where they have school three, but otherwise, service sector does not have that uh that much. Um however, their S is important, and then manufacturing side, it's E and S both are important because they are having larger carbon footprint and depending on the sector again, S also is important because of labor involved, etc.

SPEAKER_02 13:06

Makes sense. Is there um um given the foundational importance of governance? Um how do you drive maturity both both within uh well at the board level for sure? Uh, because obviously the the bigger the organization, the more likely it's you want to have uh sophisticated board board members that in in in Canada the most popular board designation is the is ICD, instituted with corporate directors. Um so but but it's very expensive, right? It's like $20,000 to get certified. So uh board governance in some cases tends to be lower, and obviously the smaller the company, the lower the maturity. So, how do you build governance maturity both at the board level and at the organizational level? And then how do you drive clarity between what's the role of the board, what's the role of the CEO, what's the real the role of management?

SPEAKER_01 14:02

Yeah, yeah. So that's the that's where the governance structure comes into place. But uh to answer your first question, um, how do we drive this is through awareness and uh it's through education. Um, depending on the majority level of the organization, uh, whether it's a company, as you mentioned, that 2015-2016, a lot of hype about ESG, a lot of people were doing ESG. And so if a if an organization has been doing ESG and producing or publishing sustainability reports, then I would assume that they have some level of uh awareness inside, or they're doing it for compliance, or or they're doing it for brand building. Um, you know, they have some level of maturity. But let's say if an organization is a small one or they haven't done ESG before, they haven't produced any kind of sustainability-related information, then in that case we start with awareness. And the awareness um through our consulting assignments, um, it happens through first is the board and the C levels, and that's it. Then we go to the mid-level to determine material materiality, and then to you know, we give them OKRs and um action action plans so that they can drive it through in the entire organization. So board education is uh is the required you know, solution in case organizations do not understand about ESG or they haven't started the journey. But in case if the board is matured, and I mean sustainability reporting is matured and they have awareness, they've been doing it for compliance, even after that, board education is needed. For example, now we have ISSB as the um as the standard which is up, which is applicable in about 21 jurisdictions that they have made it mandatory, and 40 plus are on their way to become mandatory uh overall um very soon. So when we're talking about this ISSB, ISSB is about, you know, we both will understand more like about CS finance, uh, finance people will understand that it's about integrated reporting. So yeah, where you integrate finance with ESG and uh annual reports should inform how ESG or climate situation is impacting finance, and how are you investing in climate and ESG-related initiates? So you have to put that information in the normal annual report which company publishes every year. That's what ISSB. I mean, that it's much more detailed, but uh you know, overall the concept is this that you have to integrate it with financial information and publish it for your shareholders or stakeholders. So when ISSB is the new new thing, then that's where we need to educate board and sea level again. That hey, ESG is not a cost center, ESG is not one department that you put a chief sustainability officer and then let him work and ask for data and publish a report. It's not about that, it's about how you are running and doing business. And are you considering ESG? You have to not only report, but you have to show the KPIs, you have to show how it is impacting your balance sheet and BL in terms of carbon pricing. I mean, if you don't have that information, um, you don't have that knowledge, how to get that information, it's very difficult to produce such kind of a report.

SPEAKER_02 17:39

Agreed. Um on the report side, uh and and I couldn't agree more that ESG does not sit within one department and and and naturally you you may have 50, 60 or more metrics within the report that need to be assured on. Um and and some of them would not naturally would come from people in and culture or would come from the environment or different groups. Um what are some of the best practices that you've seen companies adopt around the around EFG or sustainability reporting, being on both on the production, but also more importantly, driving the lasting sustainable changes that actually move the metrics?

SPEAKER_01 18:23

Yeah, so um the first thing uh for companies who do it very well, I'm I I mean it's very uh cliche to use this example of Unilever. It's a Unilever initiated in 2020 2010, uh uh 10 years, 10 years sustainability linked plan. So they drove it for 10 years and they did it across their business segments and everywhere. Um, and then they they always get got ranked top company in terms of sustainability. So when you're talking about best practice, let's see, let's say Unilever has a best practice. How did they achieve that? By integrating uh sustainability or ESG parameters in their business strategies. Companies which integrate sustainability or ESG into their normal business strategy. I mean usual business strategy, which is done three to five years, and then annual business plans, which are done every year. If you integrate ESG into that and then set your objectives, targets, and KPIs based on that, and then produce a report which comes in the natural course, normal course of business, that's where the best practice is. Let's take the other example: a large company with 20, 25,000 employees, 40,000, 50,000 suppliers, and then they have a sustainability team, one person with three, four executives floating around Google Sheet to get the information and data for EHG. Where finance person doesn't know where this data will come from, how do I report in the data? Operations, carbon footprint. Okay, they are they're just doing the numbers, but they are not aware of how these numbers will impact the business overall. And likewise, logistics or any other department, they don't know. Like, you know, we have a client in uh logistics industry, so they use a lot of packaging for transporting goods from one place to another. Now, if the warehouse department doesn't know that this packaging needs to be put in right in certain order or we need to use more of recycle packaging, if things are not going to change. Just in putting numbers in the Google Sheet or in any kind of data reporting, ESG reporting software, it will not help the company because you are not doing real things on the ground. And real things on the ground will be done if KPIs are set properly. If KPIs will not be set properly if it is not integrated in business strategy, and this is a major problem. You know, we have we have clients, and that clients they they they they go through the entire uh cycle, I mean entire steps process that we take them through. They publish their ESG reports, but then they're back to square one because they say that oh, our employees are not doing what they they should be doing, even after implementing systems and processes, because the change has not happened, and change will happen only when your business is business strategy will set their KPIs performance, you know, integrated into them without even saying that this PSG. You don't have to name it, you don't have to label it. So that's one way where the backlash and you know pushback can be reduced.

SPEAKER_02 21:50

For sure. I mean, I I I I come from the world of consulting prior to being in industry, and uh doesn't matter what. Consulting for you or they they logic have the same variation. It's a pyramid, and at the top you have governance, people, process, technology. That's really the pyramid. And you have to make sure the entire pyramid is in sync and working. You need to have the governance to set the directions or KPIs or metrics or measurements or whatever it is. And then people need to have the tools. They have to have the process and then the technology to support it. So speaking of technology, can we just double-click a little bit around Corp Stage? And I know that you guys are a dual-focus firm, you focus on consulting clients and helping them with their ESG maturity. But what is Corp Stage does? What does it do?

SPEAKER_01 22:44

Okay, so the Corpstage platform is uh is an end-to-end operating model for ESG. What you rightly mentioned, it's about the governance technology process and people. So it's like uh you can consider it also as ERP of um ESG, where people come together, you can onboard people, uh, and then they manage their um their own part of uh you know ES or G, whichever uh they can like I was talking about operational person getting the carbon data on the platform. So that's how people get connected. You can invite as many team members as possible on the platform, but the difference between COP stage and other reporting software, I mean there are tons of ESG reporting software. Um, and then you know, when we go out and they say, Hey, we are ESG, but they say, huh, there are so many, you know, what's the what's the moat? Well, how are you different?

SPEAKER_02 23:44

Like, oh, we do ESG too, right?

SPEAKER_01 23:46

Yeah, yes, everybody, you know, and yeah. So the thing is on our platform, it's evidence first and then reporting next. Um, so companies and it's very uh very automated in the sense that when you and when you start the platform and you want to get onboarded, you just you are given a checklist, and and those checklists are optional, mandate not mandatory, but then there are it gives you guidance on what information you have in your company. You just upload that. You just upload, integrate, connect through Google Drive, SharePoint, or through API, I mean your ERP, whether it's QuickBooks, whether it's Zero, or whether it's SAP for HANA, uh, whichever, or Microsoft Dynamics. So you integrate that and automatically the data comes on our platform, ESG platform, and it gives you a score of where you stand in terms of completeness, in terms of your evidence-based, and in terms of quality. I mean quality as well. That yeah, okay, these documents you have. Let's say you have a business strategy, you have a governance committee, and you put upload the document that you have is you have last year's carbon footprint report, you just upload those, or you have electricity bills, you just upload those, or you get connect those. So our system automatically, with the taxonomies you know integrated into the system, automatically identifies according to ISSB, you are 50% ready, according to GRI, you are 40% ready, and so on. And then automatically, action points are created where you can assign a person. Okay, this person will do what now that is for report preparation, but for report preparation, you need to do real work, so then you can you can create those as initiators or projects to actually do those works. For example, you don't have a governance committee or sustainability committee, so then you have to allocate that task to somebody who can help in creation of that committee, so that's end to end, and then everything is provenance-based. You have you know fingerprint or hatchcraft technology, which is fingerprinting every document. AI does the extraction of the data, but without human governance, without human signing on it, I mean the system doesn't take it inside. It isn't, so we don't give AI the judgment. Yeah, yeah, we don't give AI the judgment, we give the role of a worker. AI is working for us, but AI is not taking decisions or judgments on behalf of us, so it's not a black box. Our system is very intelligent, but it's not a black box. Everywhere, human governance, because that's that's my thing, you know. I come from the governance background, so I have made sure that every point governance is considered so that it becomes auditable, credible, verifiable, and auditors. Every point that is considered on the platform is that keeping in mind what auditors will ask. Yeah, what auditors will ask, and and our carbon footprint calculator covers 35 countries across those jurisdictions. So any country, you are from any country where you'll get emission factors related to that country, not just you know, most platforms they are built on DEFRA, but ours is like you know, real emission factors from those countries.

SPEAKER_02 27:22

Yeah, makes sense, and and and and more where most companies struggle with is the evidence, like being able to prove whether they do something or don't do something, and so having the information readily available to prove out this uh it makes a big difference. The other thing that I have seen is when we were preparing the sustainability reports is the conversation that lays on with the rating agencies, um, and a lot of it comes down to show me, show me, show me that you have this, show me that you have the is the policy, how complete is the policy? So it's it's that evidence-based um that work is I would just uh like to correct that.

SPEAKER_01 28:04

It's not evidence based, it's claim-based. So you have collected the it's claims-based. So because you are claiming something that this is my this is my ESG, and and then auditors come and ask where's the evidence, and then you collect the evidence. That's a heading, that's a problem. What I am saying is let's say a small company, a small hotel, a small uh clinic, they want to show it's a very, very small entity. That is what I mean to say. If they want to do ESG, whatever they have, because ESG is not to be grown or created, it's in your system. You know, whatever you have at the moment, you upload that first, you would have electricity bills and water bills to the minimum. Any business would have that. So you don't have to go back and collect those once you report that data. That is where the headache comes. What I'm saying is bring the evidence first, and that's where your records are generated based on that. So you will not have to run here and there, so it's not claim-based, it's evidence first. That's evidence, and that companies will not have a problem because that's a reality that they have, and if they really want to be credible and if they want to be provable, because auditing is the next um, I would say, context or next situation um according to mandatory standards, also. And and companies which are not auditing, they are also not getting the premium pricing. Because if you know about the regulation uh or new standard, which is CBAM carbon border adjustment mechanism, small suppliers who are exporting to Europe, they have to report on scope one and scope two of their business, you know, manufacturing operations. But if they get it audited and verified, they get a better price.

SPEAKER_02 30:08

Yeah, no, go ahead.

SPEAKER_01 30:11

Yeah, that's where the value comes from auditing, you know, and if you have records which are provable, even in tenders everywhere, you know, rating agencies or tenders, government tenders, it's very easy if you are going by whatever you have documents first and then building the records that makes it better for companies. Yeah.

SPEAKER_02 30:35

Makes sense. Um I'm assuming that's where we had it is that like when the Surveys Oxy Act of 20 of 2002 came in, um, 2004 to 2007 was uh bonanza for consulting firms in terms of implementing this. I'm assuming that companies will adopt the same type of framework that and adhere to the same level of rigor around EHG when they're producing sustainability data, the same equivalency in terms of having the uh having the same having controls there of the same level of of um importance as what you would have over internal controls over financial reporting.

SPEAKER_01 31:27

Yes, that's true. That's true. So that's where that's what I'm talking about, integrated report, ESG and financial report. So that's where you know importance of internal controls, internal audits, um, proving that has become control centers, this has become more more and more important. Um, that's where our work is also in you know growing in the sense that you know we have um we have done lots of training for internal auditors on how to do ESG audits because companies are realizing that there is a need for internal controls related to ESG data. Um one more thing I wanted to, you know, um wanted to say that when ESG was uh like 2015 to 2022 or 2023, that was a period of confusion because ESG was evolving, and then there were lots of standards were introduced or they were already there, but companies were not clear which one they should do. So let's take UNSDGs. I mean, everybody had to show all companies had to show how they are you know contributing to UNSDGs, then GRI was voluntary framework, TCFD, and then came TNFD, then SASB, I mean, and then come and CDP reporting. I mean, that's that's where you report your data and uh you get rated again. So and eco withizen the platform. So companies, I mean, when they are reporting and they are thinking this framework, let me let me ask this consultant to come and do it, then another CDP framework. Okay, we we still have to do CDP, let's call in another consultant to do it. So their cost was more uh because of the standards or the number of frameworks that they were following. But with the software, when when you just upload, you don't even have to key in. 95% of the data is connected or uploading on the platform. When you do that, you don't even have to worry about definitions, parameters, principles, KPIs. I mean, what will be what will be required to do CDP reporting or to do SAS B reporting? You don't have to worry about that because the intelligent system does it all for you.

SPEAKER_02 33:49

But is this really so? Um what um my personal experiences with um with with one of the companies, we spent close to 30 million dollars on on a data transformation in terms of getting the data ready in order to be uh uh usable for HG reporting. Um some metrics like okay, well, the diversity of the board, easy. You you you can you can see this diversity of employees training, like like some something something is very easily available, whether it's through your corporate ERP or other learning management systems or whatever. When it comes to like uh okay, if emissions report, and let's say it's called point emissions, like uh again, fair days, you you you have monitors and things like that. What is this university the case that the data is available and you can ingest it or kind of like what like typically what I've seen from programs like that is the data is the foundational piece that the trips companies if they have the data? I I feel pretty confident they can execute and actually build out the report and assure on it. Where they luck is kind of getting to the data. Thoughts?

SPEAKER_01 35:06

Yes, yes. So data is a problem. Uh, first of all, there are again there are two problems there. One is that they don't know whether data is coming from or what will what will be included in ESG data. They may already have lots of things, but they still don't know whether this thing with this particular document, which I already have, will contribute towards ESG. So there's a gap of knowledge there. And the second thing is that yes, for scope three, for example, um, or waste, you know, I recently I I I had a I mean one of our potential clients is hotel industry. So uh we would just do a round of the hotel and understanding, you know, preliminary things about YSG. Yeah, so about waste, for example, they don't know that they should be weighing the waste for what they are throwing out, right? So just a simple procedure. They have all everything that they do it two times a day and everything, but then they don't just they have a weighing machine in the kitchen, but they just have to weigh it. So simple processes would help them to create data, right? So that is one thing, and then related to sculptry, it's a little complicated, and that's where I'm assuming the majority of your costs that you mentioned have gone, is because suppliers are reluctant to provide information, and then it does require a lot of engagement with suppliers. Um, and other other like all 15 categories have some way or the other you have to interact with customers, you have to interact with your suppliers, and that's how you can get the data. Um, yeah, but then again, I would say if you have a proper technology platform system which can send out questionnaires or for the activity-based data, you can just send out very simple with the help of a click. You can send out the questionnaire to your sub 20,000, 50,000 suppliers, and then of course that would require CRM. I mean, you would follow up with them to give the data, but then you follow 80-20 rule that who are the top 20 or you know suppliers for you, top 20%. So you get the data from there. Another way to get the scope three data is the spend-based method, which which most platforms are now using. They're connecting the ESG platform or ESG modules to the finance modules, and that's where you know, when supplier is sending you the materials, let's say you're a government company, if the supplier is sending you textile, you can see how much carbon footprint is there in that. I mean, where it is coming from, how many miles it is coming from, which country it is coming from. So all the invoices are there in the system, and we can actually connect the ERP to bring that data into ESG carbon calculators to get the spend-based method of scope three calculations. Scope three, of course, are estimated ones, uh, not uh 100% accurate, but I mean companies do rely on that. But I would say first step is to connect and get the scope three by spend based, and then you implement supplier-based questionnaires and you know detailed engagement activities to get the real activity data.

SPEAKER_02 38:32

So, Nisha, how do you ensure data quality and data integrity?

SPEAKER_01 38:39

So, data integrity and data quality, as I said on our platform, is that once you upload the invoice and uh any any invoice, any system, it comes on the platform, then there is a human confirmation which is there. Human confirmation. So a person who is responsible, we follow Racy metrics. So, according to the RACI metrics, the person will have a signing authority that yes, now the data has come, I'm signing it. So there is a provenance on that, that this person signed this particular document or ingested this document at this time, and there's an audio trail related to that. That's how data quality is monitored on the platform, that everything is proven, and I mean, um, you can everything is uh confirmed by a human person whose job is at risk if they do not do so, I mean, properly. So that's where. And at the time at the at the source level, um, the quality of data can be improved if you connect directly to HR platform directly to the system. You connect uh nowadays we have smart meters, so you connect utility APIs. You know, for example, we have utility APIs, so water sewerage, electricity, sewerage, and waste uh everything is coming directly from those IoTs or diet, those platforms. So it's monitored, it's it's yeah, it's evidence-based.

SPEAKER_02 40:10

Would you um I mean AI has been uh an incredible unlock, but you would would you ever consider taking the training wheels off on the data sets? Um, so if you've trained a data stream, um like the the data is properly labeled, and and would you consider you know removing the human from the equation and just let the data flow?

SPEAKER_01 40:35

No, I won't do that because no, no, no, totally no. Uh, if I want my platform to be fully evidence-based, credible, and provenance, then I would not remove the human aspect from there to confirm the data. The governance, as I said, is the priority in every situation, even if you use AI, if you implement AI, we are seeing a lot of cases of shadow AI, and then how employees are leaking out information through their personal chats. I mean, people to reduce their workflow, they're using chat GPTs or cloud or in their office environment, and that's how a lot of data privacy and security issues are happening. If a small company, you know, doesn't take care. I mean, people may argue that oh, governance is large companies thing, they they set up board, they have committees, etc. But imagine a small-scale company, you know, allowing its company to, or even if not allowing, people are using chat GPTs and you know their own uh AIs to reduce their workload, just uploading a supplier-based contract on the this thing to analyze what are the pricing parameters, etc. I mean, imagine if something goes wrong with the data privacy, the company will become bankrupt on the next day. So governance is very important even for small-scale company. It's not it doesn't come in the form of a committee or board members, it doesn't come in that form, it it comes in the form of simple processes and simple supervision, which is required.

SPEAKER_02 42:14

Yeah, yeah. So to the to the pundits out there that that continue to view EHG as um as you put it as a cost center, is as a necessary rule or regulatory requirement. Um, can you make the business case as to where you have seen sustainability actually affect access to capital rather than simply corporate reputation?

SPEAKER_01 42:39

Absolutely. And uh last week I was in Singapore, I was my topic of presentation in the conference was ESG pays off. ESG does pay. So absolutely, there is a business case for ESG. If and as I said that there are two ways where business can draw value. One is the value creation aspect where business can have growth, profitability, and people may people may what my the audience would be saying, ah, she's just talking like that. But in case you, I mean your suppliers today, uh, suppliers are asking for ESG information, government tenders are asking for information, exporters uh, I mean, are required to produce their uh scope one, scope two, at least scope one, scope two data. So you need to start somewhere to talk about ESG. And you also like it's happened in the past, even without the terminology ESG, the Monsanto um you know merger and uh acquisitions failed because of lack of due diligence, you know, that time. So if you don't take care of the S or E in environment, uh pesticides, I mean uh uh customers, uh this thing, uh taking care of customer interests, companies have been fined and penalized, and you know, they've lost values. So just Taking care of these in the label called ESG is the same thing which we've been doing, which is business, which business is expected to do. So there's nothing new, and that's where the growth and the value comes from. Second thing is resilience. You cannot build resilience and risk management, you cannot do without considering ESG parameter.

SPEAKER_02 44:23

And the the the on the EG parameters, um are companies measuring too many things. Um does this become a bit of an overload in terms of what we're focusing on? Kind of like how do you differentiate the the things that truly matter from the from the ones that it's nice to have?

SPEAKER_01 44:47

Yeah, yeah, that's what we call materiality analysis. So companies, um, and when we when we say materiality analysis, it should be done at the time of strategy. So um, and in in the first part of the podcast, I mentioned that you know it's important to integrate ESG strategy with business strategy, right? So when we are doing, when we are coming up with ESG roadmap or ESG strategy, materiality analysis should be done. Now, what is this materiality analysis? Materiality analysis is to identify which factors are affecting our business growth, value, profitability, risk management, which are those, whether these are customers, are our customers satisfied, are our suppliers happy? Do we have long-term relationships with our suppliers? Uh are our employees productive or satisfied and happy. So these things, I mean, engaging with different stakeholders would tell us whether we have materiality related, um, I mean, to which business section or business function do we have the materiality? So it's kind of internal and external business environment analysis to identify the risk factors. That's where if the materiality is significant, you can rate it on a scale of one to five. And if it is significant, that should be the priority for the business rather than overloading and trying to you know gather data and everything uh from all the parts and and making ESG a cost center. So yeah, yeah, that would help in you know creating more value rather than uh ESG as a cost center.

SPEAKER_02 46:31

Makes sense. Um so Nisha, um uh our OSC is primarily comprised of investors and and and founders. So if you are a founder um rather than a big enterprise that has like a 20-person reporting team, um like small organizations don't have the luxury of big reporting things or chief sustainability officer. What should a company that's let's say between 10 and 50 million dollars, what should they be doing around ESG?

SPEAKER_01 47:05

Yeah. So I would say uh they they should appoint one champion. I mean, not necessarily hiring a chief sustainability officer, it could be one ESG champion in their organization, and then uh start with a small meetings, um, a small committee which meets every month or let's say a quarter, um, and then start discussing about ESG. So that will be at the awareness level. Um, so first creating um through this committee, creating awareness within the organization, and then slowly uh gradually integrating business strategy with sustainability mindset. So I will not use the term ESG also. Um, just having a sustainability mindset and coming up with your routine normal business strategy and business planning would really help even a small company to do so without in without incurring a lot of costs in in the so-called ESG department or sustainability departments. It don't have to create that just one champion, just one nomination is good to start, and then of course, you can take help of um consultants or platforms to drive it further.

SPEAKER_02 48:25

Makes sense. Um what are there gotcha moments? I are the things that companies that they're adopting or going down the path that's actually ultimately lead them down the wrong path, and kind of like what are the things that companies should be mindful of when they're thinking about ESG and sustainability and reporting and just changing the behavior and driving for impact? What is a path that they shouldn't take? But maybe it's it's it's it's a path that other companies have taken, and what is the best path to take?

SPEAKER_01 49:07

It's a it's a tough question, or it's a very interesting question to answer. Also, I've seen companies as I also mentioned in um a couple of minutes before, that um the companies they think that ESG needs to be done from the compliance focus, and they start getting reporting it, and they hire lots of consultants because they don't understand the definitions and you know what is required for compliance. They are also scared of greenwashing, so they engage with consultants and all that. Um, what I've seen is that large companies, particularly, they they spend millions of dollars only on the consulting part. So they invite, they they spend, and then and then later, you know, after two years or three years, they realize, oh, now we don't have any more budgets. It's it's taking a lot of money, you know, we don't have budgets, so how do we how do we actually implement this? Oh, you paid a lot of money for just coming up with a strategic roadmap. You paid a lot of money to just understand what you need to do to do your gap. This is the now when it when it is a time where you have all the foundation ready and you want the decarbon, you should be doing decarbonization, you should be taking real initiatives, you'll you're out of budgets. So that is where wrong practices. I would say I've seen companies like that. Um, that's where the wrong path you know has hurt them a lot. Now, why it is a wrong path? Because um it has exhausted their budgets. But what should be the right path? The right path is um starting from the board of directors to the C levels, uh, you know, educating and making sure that they understand that ESG is a value creation tool, it's a risk management concept that they should be taking forward. It's not something just for compliance or just for reporting. It is for everyone, it's a mindset that companies I mean everybody should follow. It's a cross-functional thing. We have to involve everybody, it's it's it's change management, it's a transformation thing, it's not one-off thing, okay, tick mark and done. Compliance and checklists do not save company from falling, you know, just following that. Yeah.

SPEAKER_00 51:27

Okay.

SPEAKER_01 51:28

They create value, also.

unknown 51:30

Yeah.

SPEAKER_02 51:30

I could agree more. Um, it's it's a common misunderstood area. You talked about the importance of integrating DHG strategy with the overall business strategy. Um, a lot of companies struggle with this. Uh, a lot of the strategy exercise tends to happen with obviously um um within the corporate strategy groups, if if it's a bigger corporation consultation with the executive team, with the board, but quite often a lot of things get overlooked, and uh that the focus tends to be on the things that they're revenue generating, like like you know, like what would make the cash rate ring, and what would keep the cash rates ringing, and and anything else, it it's it's I don't want to say that it's an afterthought, but it's certainly doesn't have the same prominence.

SPEAKER_01 52:20

Yes, yeah, that's yeah, yeah. But but the but the customer scene is also changing, as I mentioned about the exports and CBAM. I mean, that's where things are changing on the ex uh exporting's export side. On the other hand, when we look at banking, I mean, uh the millennials or young uh youth generation, they are asking for a lot of green financing, sustainable financing. I mean, where are you putting my money? If I'm depositing the money in the bank, where is my money going? And are you funding it, using it for fossil fuels? So, and it's also proven that um about companies can charge seven to nine percent more if they are you know producing sustainable products and using recycling or you know, any other kind of sustainable practice in their production. So premium pricing is possible, it also reduces waste and brings efficiencies and savings. That also contributes to profitability, but you know, people want to see numbers. I tell my SMEs, SME clients, that give me six months, I will show you numbers, how the numbers are coming in. So we we don't say okay, we just come in, we ask data, help you report and put it on your website or help you to do the compliance. We say, okay, we are coming in, you just give us six months, we'll show how your business value is created. Simple things, your electricity, water, waste will contribute towards efficiencies. Your employees, if they are heard of, if they are taken care of, they that will contribute to productivity. This is proven, you know. One of our one of my client companies, we were having materiality workshop, and the company was insisting. I mean, the company had strategy, green strategy, that they wanted to implement solar panels and do rainwater harvesting, etc. But the when when we got into workshops with middle-level employees, we saw that uh, you know, employees were not happy about certain things, there were certain parameters. Um, I mean, for example, the top management did not engage well, they did not understand what employees want. And then there was the whole session became about complaints, you know, in the in the cis in that workshop. So, what we found that okay, the company has a priority or materiality of reducing the number of accidents, uh, making sure that all the employees are engaged and heard of. Um, this is a very important aspect of leadership. Companies, if they ignore it, they would forget about ESG label as such. Companies will have loss of value, you know, when they are not doing this well.

unknown 55:07

Yeah.

SPEAKER_02 55:08

Okay. I know we're almost at time. I'd like to close my interviews with a choice of a question. Uh, you can choose to answer one or both. Um, but what is the kindest thing anyone has ever done for you? Or what is the best advice you have ever received?

SPEAKER_01 55:26

Best advice I have ever received. And the second question is the kindest thing has that anybody has done for you. Oh, that that actually there's a lot, but I can say, you know, inviting me for this podcast has been the kindest thing, Maxim. So having me here is uh I'm very thankful for that. Thank you.

SPEAKER_02 55:52

This is the first actually.

SPEAKER_01 55:54

Yeah, that's true, yeah. But for me, um, I mean, the advice that I've received, the best advice is that we should always explore our own potential, and uh the our potential is hidden inside, and same thing applies for companies also. Um, you know, just to make cash flow rich, cash is inside the business, it's not outside. Don't look for it outside. The best internal finance comes from working capital. We all know that. So same thing applies. I mean, it's a human thing as well. We have all the energy, we know how to get things done. It's only that unlocking our potential will help us to do the so. So that's yeah, that's the message and which uh which drives me, you know, in my career, in my yeah, life.

SPEAKER_02 56:46

Nisha, it was an absolute pleasure having you on and getting you insights on EHG sustainability, corporate governance, and how companies should think about adopting this or uh fostering it.

SPEAKER_01 57:00

Yeah, honored to be here. Thanks, thank you, Maxim.

SPEAKER_02 57:04

Really honored to be here. Thank you.

SPEAKER_01 57:05

Yeah, thank you.