Why environmental, social and governance at Demica matters

At Demica, we believe our technology, combined with professional services and data, can be the agent of change to help clients transform supply chains and meet their environmental, social and governance (ESG) objectives. 

We begin this year by celebrating our ESG initiatives at Demica which started in earnest in 2H 2022. ESG encompasses a spectrum of issues which have an enormous impact on several fronts -the environment, people, their working conditions and how workplaces are governed. When serious topics with unlimited timelines are extensive, there is a tendency to provide anodyne soundbites and stories. Rich in hope, yet removed from reality, leading to charges of greenwashing and the ESG becoming a political lightning rod for vested groups.            

At Demica, our approach has taken shape organically. We start from the ground up with small steps and incremental changes. Fully aware of our position as a conduit in trade financing, would require we maintain a level of “neutrality”, while at the same time, address Demica’s employees, shareholders and clients concerns on the multi-faceted elements of “E”, “S” and “G”.  

Employees have voiced their aspirations to improve our workplace on all three fronts. We have made incremental improvements since returning to our offices.  We work with our supplier to lease equipment, and our computers are re-purposed and recycled for use in schools and non-profit organizations to enhance the economic lives of our equipment and reduce landfill pollution. Our daily coffee is sourced from Fairtrade producers, and we have banished the use of plastic cutlery, cups and plates.  Meanwhile, our cycle-to-work schemes help reduce the carbon footprint and increase our colleagues’ wellbeing. While each act may seem mundane, if we multiply this across offices in the city, the environmental impact can be material and the carbon load reduced. Small incremental steps to improve are achievable and sustainable.  

On the “S” initiatives, we can be justifiably proud of all the activities which raised cultural awareness and highlighted the diversity of our workforce.  With over 300 employees, Demicans are made up of a diverse and global bunch, with at least 36 languages spoken. Long before it became fashionable to celebrate our uniqueness, we were celebrating Diwali, Eid, Hanukah, the Lunar New Year, (and) Christmas! With the official launch of Demica Together, we added Believe in Pride, Hispanic Heritage Month, a (lecture) on Jewish festivals, Black History Month, World Food Day Auction, World Kindness Day, International Women’s Day and Suicide Prevention Awareness, and one is justifiably left wondering if we actually do any work! Be rest assured, we do! 

Demicans have contributed significant resources supporting charities such as Career Ready, raising c.£30,000 for the organization in late 2021, volunteering, mentoring and organizing office visits to Demica. We have also raised £7,000 to support victims of the Russian- Ukrainian war and other charitable causes.  

What is so encouraging is each event was taken up by employees with enthusiasm, whether with organizing, attending, learning, or eating the fantastic food which is often the showcase of these celebrations.   

As for “G”, have we reached the limits of what we can achieve?  

As a vendor to leading financial institutions, we are often asked to sign up and comply with our clients’ stringent policies on labour standards, anti-bribery and corruption and carbon-reduction programmes.  While we can meet most way towards compliance, there are instances where these policies are inapplicable and / or unsuitable from Demica’s point of view. For this reason, senior management at Demica formulated our own ESG policy which aims to help our clients meet their ESG aspirations through the utilisation of our data set while maintaining our level of neutrality.  

Part of the challenge which ESG proponents must grasp is the lack of meaningful data or KPIs to provide sustainable measurements, leading to charges of greenwashing. The issues raised by lack of meaningful measurements and data have led to accusations that ESG is no more than a political movement and has no place in finance whether on the asset management or lending side. There has been growth in the number of investment products marketed as ‘green’ or making wider sustainability claims. Exaggerated, misleading or unsubstantiated claims about ESG credentials damage confidence in these products1.  In the EU, the lack of coherence on a climate change framework, exacerbated by concerns over energy security brought by the Russian-Ukrainian war, demonstrates the importance of data to fight global warming.   

At Demica, our aspirations are to work with third parties and clients to gather data, enhance our supply chain finance platforms, and apply ESG criteria to funding selection.  At the same time, respecting our clients’ goals, our ESG policy is aligned to meet their aspirations.  We believe our ESG policy punches above its weight for an SME firm.  We collaborate with our clients and investors, such as Barry Callebaut and the International Finance Corporation (IFC), to provide the company’s suppliers with rewards for improving the social and environmental sustainability of their business practices.  Initially launched among sugar suppliers in Mexico, the initiative to help emerging markets suppliers meet sustainability goals, will expand in 2023 to other countries and cover suppliers of a wider range of ingredients used in Barry Callebaut products. 

As we improve and make incremental changes at Demica and to our platform, we invite market participants and clients to work with Demica to share and provide information and consistent data which can assist in improving the carbon footprint of their products, labour practices, and services or meet their other social aspirations.  While the current database and measurable KPIs may be imperfect and inconsistent, the onus is on participants in the supply-chain to start utilizing and measuring the effects of our actions, which no doubt, will increase transparency and improve pricing of these often “difficult” externalities into the financial ecosystem.

Perhaps a good start is to think about ESG as three discrete areas, recognizing the competing claims to the ESG agenda.  For instance, it is not possible to be “ESG” compatible on all three fronts.  Recent EU regulation in formulating a taxonomy for sustainable finance clarifies and provides consistency in understanding what constitutes “sustainable” investment and is a sign of maturity in the sphere of ESG investment. Nonetheless, there is an enormous amount of work which needs to be tackled and done from classification and capturing of data which a firm like Demica can contribute to the ESG conversation.