CEO says Ottawa-based firm is gearing up for a “massive explosion” in ESG reporting requirements over the next few years.
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An Ottawa-based firm that helps companies track environmental, social and governance data has landed millions of dollars in fresh venture capital as it gears up for what its CEO predicts will be a “massive explosion” in ESG reporting requirements over the next few years. FigBytes said this week it raised US$14.5 million in new funding, including US$10 million in additional equity from existing investor Quantum Innovation Fund and a US$4.5-million debt facility from Silicon Valley Bank. That brings the company’s total funding haul to more than US$20 million in the past 18 months as it looks to capitalize on growing efforts by businesses to demonstrate their commitment to initiatives such as fighting climate change, pushing back against discrimination and building a more diverse workforce. “Sustainability means many, many different things to different companies,” says Ted Dhillon, the firm’s co-founder and chief executive. “We believe transparency is absolutely key.” FigBytes’ origin story began in 2009 when Dhillon was introduced to Sonam Devgan, a fellow Indian expatriate who had also relocated to Ottawa. The two former military officers launched a consulting firm called Graphite Systems, which advised governments and businesses on climate change and other sustainability issues. “I was interested in finding a solution to the climate challenge with technology,” explains Dhillon, who came to Canada in the early 2000s to study at Western University’s Ivey Business School and became intrigued with the burgeoning carbon credit market. After five years as consultants, the pair realized they were only seeing the “tip of the iceberg” in the movement that became known as ESG. In 2014, they renamed the business to FigBytes and shifted their energies to developing a software platform that could help customers track everything from how much energy their operations consume to how their workforce demographics match up with diversity targets. Dhillon says FigBytes helps companies and governments take a more coherent approach to meeting ESG objectives. The software crunches information on metrics like carbon emissions and water consumption that was often previously stored on disconnected spreadsheets, giving users a “big-picture” view of where they stand in relation to their targets in real time. It then generates reports for regulators and shareholders that show exactly how closely an organization is living up to its promises and legal requirements. FigBytes says demand for its products is soaring as public awareness about issues like climate change grows and companies make greater efforts to be more environmentally and socially conscious. According to PricewaterhouseCoopers, almost 80 per cent of companies in a recent global survey said they employed an executive with at least some responsibility for sustainability. And as more jurisdictions ponder legislation that would force companies to disclose how they’re tracking and addressing various environmental, social and governmental factors, demand for FigBytes’ software will continue to grow, Dhillon says. “There are companies that are just playing the branding game here, and I think what needs to happen is not reporting for reporting’s sake and not just capturing data for data’s sake,” he says. “It’s got to make sense in the context of the strategy of an organization. Companies have to be held responsible for the numbers they put across.” The firm has 31 customers, including automotive giants Ford and Toyota as well as the State of Minnesota, up from about a dozen when it closed its US$7 million series-A round in April 2021. The firm’s annual recurring revenues rose 150 per cent in fiscal 2022 compared with the previous year, and Dhillon says he expects FigBytes to come close to matching that level in 2023. Now at 125 employees, FigBytes says it plans to use the latest funding to ramp up its sales and marketing efforts as it expands further in North America, Europe and Asia. The firm’s growth push comes as the ESG movement faces fresh criticism from both sides of the ideological spectrum. Shopify CEO Tobi Lütke is among those who recently joined the backlash, tweeting last month that while ESG is a “really good” idea, “the current implementation is broken, cynical, and counter productive.” Meanwhile, more companies are being accused of “greenwashing” – or claiming to live up to environmental standards but failing to actually meet them. Dhillon argues that while “there is certainly a lot of greenwashing” in the corporate world, the growing push to clamp down on such practices will be a boon to his business. For example, the European Union is looking at toughening rules that require certain large companies to disclose information about how they manage ESG-related challenges such as pollution and corporate conduct. The U.S. Securities and Exchange Commission is also crafting regulations that would force companies to disclose data on greenhouse gas emissions and other climate change risk factors. “Things are still sort of settling down,” Dhillon explains. “Where we come in is really to help companies prepare for those disclosures and be able to submit to these mandates and legislations that require disclosures.” Dhillon says he expects to see a “massive explosion” in ESG-related industries once the global economy regains its footing and interest rates stabilize. “I think it’s going to hit us very, very quickly,” he says. “The moment we have reined back some of the inflation issues, this is probably going to be the first area where spending really opens up. We want to get ready so that when the battle reaches us, we are set to take advantage and win it.”