Worldfavor Fuels Up for Ecosystem Prospects with its Sustainability Data Platform

Worldfavor Sustainability data
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More financing for sustainability reporting: Sweden’s Worldfavor, an early mover platform focusing on developing digital infrastructure to promote supply chain transparency and meet enterprises’ ESG (environmental, social, and governance) reporting demands, has secured €10.2 million in Series A capital to kickstart the growth engine.

The Nordic corporate bank SEB’s SEB Private Equity, along with current investors Brightly Ventures and Spintop Ventures, led the Series A. With the increase, Worldfavor has now raised a total of €13.4M.

Many supply chain transparency and sustainability reporting startups have emerged over the past five years as consumer pressure on ethical and environmental issues, as well as frustration with “green-washing,” has grown. This pressure has been coupled with increased attention and stringent reporting requirements from policymakers, such as via EU regulations linked to the European green deal, whereby the region is aiming to be “climate-neutral” by 2050.

Andreas Liljendahl, co-founder and CEO of Worldfavor, says he welcomes the growing number of stakeholders in sustainability reporting and anticipates a future of rich collaboration and startup opportunities to meet these standards.

“We are super happy that there are more and more players in the field. There is still room for many, many different players because there’s a huge problem — there’s many different needs in this space,” he tells TechCrunch. “There’s different needs in different sectors and so on.

“Over time I think we will see an ecosystem where the players in the ecosystem will collaborate more than they do today.”

Currently, compared to some of the more specialized reporting/transparency tools emerging to serve certain sectors or goods, Worldfavor’s approach appears to be a move for a larger platform. He affirms, adding: “We have multiple stakeholders — the buyers, the investors, the big corporations. We strongly believe in [being a] cross-industry [tool] — to make it easy for one single company to share their information to multiple actors, lowering their reporting fatigue that they have currently.

“It’s kind of a network problem because businesses are more interconnected than ever and we don’t know as much about businesses to firms so… He elaborates on why a platform approach makes sense for cross-cutting ESG reporting across complex global supply chains, saying that if you are an importer of, say, wine and you need to understand the emissions of the products you’re selling, you cannot understand that yourself — you need to ask your producer and the producer needs to understand the farms in different tiers.

According to the startup, which was founded in 2016, its network is used by more than 25,000 organizations in more than 130 countries to access and share information to support decision-making related to ESG goals, such as in relation to reducing CO2 emissions or for addressing human rights concerns.

According to Liljendahl, customers can be divided into three groups: procurement organizations with a focus on supply chain sustainability; investors and private equity firms who need to conduct sustainability due diligence on their portfolio and/or potential investments; and larger companies that require reporting to encompass their own subsidiaries so they can also understand the ESG trajectory of the entire group.

Getting Worldfavor’s network off the ground in the first place required getting enough provider data flowing into it to create the kind of utility that’s able to build momentum — but here, more than five years in, the mission looks easier as network effects kick in and work to grow and deepen participation.

Rising attention from policymakers to sustainability also looks set to drive demand for the foreseeable future.

Liljendahl claims that the team overcame the “chicken and egg” challenge of a startup by concentrating on enlisting larger firms and utilizing their influence over their own supply chains to get segments of suppliers to join up and begin providing data.

But according to him, there are increasing incentives for providers to sign up since doing so would make them more visible to the network of data accessors that Worldfavor has assembled, who are seeking for suppliers whose quality they can evaluate. In other words, having data that is currently available through its reporting platform may provide it a competitive edge. “The providers realize the importance of sharing information with one or more platform stakeholders — understand where they are currently and may be able to more readily know how they could better their own.

It’s crucial to keep in mind that the data providers on the Worldfavor platform self-report their data, so the company isn’t actively auditing any of these ESG-related claims. Instead, it aims to increase transparency (and access to data), which will bring some “disinfecting sunlight” and support higher standards of accountability. (However, the latter’s delivery is probably a brand-new startup opportunity for teams focusing on data-verification/auditing innovation, positioning them to collaborate with platforms like Worldfavor.)

According to Liljendahl, “the first fundamental necessity is to create an infrastructure to enable information to flow more readily.” Then, “we make sure the information is shared with extreme transparency, so you can also track back,” including with whom, when, and other details.

According to him, the team has certain tools on top that perform some analyses and comparisons in order to provide some fundamental checks on reports. In order to catch inaccurate reporting, it is attempting to build more complex tools and even some sort of automatic auditing. To do this, machine learning technology would be used to recognize claims that are unusual or changes to reporting history.

Incentives to cut corners (or worse) and pump out “ESG hot air” may well linger like a bad smell, despite increased transparency across industries and sectors which should, hopefully, work against bad actors by making it harder to get away with faking key types of sustainability data. Emissions reporting requirements have already led to some major scandals.

Self reporting (as opposed to active auditing) is undoubtedly the most scalable approach to this because for the time being, Worldfavor’s priority is still on increasing usage in order to aim for genuine size. The ability for information to be self-audited in the future “may be a fantasy, but only if we raise the transparency between organizations,” the speaker claims, adding that “our main purpose is to establish the transparency today that’s lacking — entirely missing.”

According to Liljendahl, the goal of the Series A funding is expansion for the platform’s data suppliers, data accessors, and daily data transaction volume. Of course, they also want to increase ARR with the usual goal of expanding the firm and placing it on a stable financial foundation. We have tremendous goals, he continues. “Our yearly recurring income is rising at a little over 100%, and our user base is expanding at a little over double that rate. And we are overjoyed about that.

Babak Etemad, investment director at SEB Private Equity, noted in a statement on the fundraising, “We’re thrilled to join the amazing team at Worldfavor in their drive of raising the standard on sustainability and helping organizations communicate crucial sustainability-related information. We are certain that Worldfavor will be a key player in this sector over the next ten years, and we are eager to help them along the way.

 

Source: Tech Churnch

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