E138: Indika Edussuriya

Richard:
Hi, and welcome to another episode of eCom@One. Today's guest, Indika Edussuriya, head of ESG and principal sustainability consultant. How're you doing, Indika?

Indika Edussuriya:
Doing good, Richard. Thank you. Thank you for having me.

Richard:
No problem. I'm looking forward to this one. Myself and Indika have had a few conversations over the last 18 months about various things around sustainability and B Corps and various things. So it was an absolute no-brainer to get you on, Indika. But I think it would be great if you could just introduce yourself to our listeners and tell us how and why you decided to work in the world of sustainability.

Indika Edussuriya:
Sure. So I've worked in different industries in quite a few roles during the last 22 years. So 22 years of experience in various roles, starting from marketing, finance, wealth management, manufacturing, water transportation, storage, construction, so with quite a few industries. And during that time I'd never seen business communities, entrepreneurs, resource owners across the world coming together for the common goal of betterment of the environment, society and economics as much as through the sustainable development paradigm. So sustainable development paradigm has been and will be the need for the next three to four decades at least. And I felt that I had something to offer. So since about 2010 I've been involved with the knowledge expansion, formalization of the sustainable development knowledge, strategic development and implementation within the sustainability and ESG scopes, focusing on corporate and social spheres.

Richard:
Yeah. So, very busy.

Indika Edussuriya:
Yeah. It's been a busy period, and I think it's going to be busier in future.

Richard:
Yeah. I mean, I think, obviously, e-commerce has had this insane growth, especially this last couple of years with COVID and the acceleration of deliveries, et cetera. So why do e-commerce companies need to focus on sustainability now? Why is it more important now than ever?

Indika Edussuriya:
I think that's a very important question. And when I think of it, I can think of three ways, three perspectives which is quite clear and applicable in the e-commerce industry. So an e-commerce industry has, actually, three clear sides to their story and sustainability. One would be the company itself, and here we would consider the company from a double materiality scope. And what double materiality is, I think it's now well-read and well-known. So how to remain resilient through the transition and increase business value addition, which is a financial impact materiality, which is priority for any business, and that's again for e-commerce. And then also the impact of the company's activities on the outside world. So I mentioned outside world rather than business environment because the moment I mention environment, the focus shifts to carbon emissions and we become overwhelmed with reducing and offsetting carbon emissions only, which is carbon tunnel vision.

The outside world to an e-commerce company would be the society or the location they operate out of, the employees and their networks, local economy, local authorities, various legal entities, and then also the national environment. So quite a bit involved when you say the outside world, and that's another perspective. The second perspective would be the producers of goods and services, individuals, business entities with whom the e-commerce company maintains business relationships through short, or medium, or long-term partnerships and agreements. And if you consider this section of an e-commerce business, it has the majority of carbon emissions of an e-commerce company. Actually, about 98% of your emissions would be embedded in scope three within these organizations that you have an agreement with or are going consult partnership with.

And the third perspective would be the larger reach or the public, the subscribers, the participating buyers of goods and services that are facilitated through the e-commerce business. So an e-commerce business has more responsibility within the sustainable development paradigm than a conventional company, which is a revelation itself. I mean, again, when you drive down the road and you come to the industrial areas, you would see smoke rising from a manufacturing plant or a factory, but what you have to remember is that the e-commerce company has more that can be done within the sustainable development sphere than that large-scale manufacturing plant. This is due to the indirect influence an e-commerce company has across environmental, social, and economic strata globally.

Richard:
They've got a lot of responsibility, haven't they? Because I think as an e-comm store, I think I've been, well, I was buying things and selling them online, probably 20... I've just prepared a presentation, actually, and I think 1999 was the first time I sold something online, which is a year after Google went live, I realized. And I think, obviously, there's a lot of responsibility on e-comm stores' shoulders to make sure that through that process, like you say, where you're buying that product from, but there's a whole journey before that product leaves that factory of where those materials have come from and then what is done with those materials and where the raw materials have come from, how then that thing, that product is manufactured.

And then it's got to be transported to you as the e-comm, well, probably to a third-party logistics company first, then to you. And then once you've got it, then you have a responsibility of then how you then manage your own distribution center, your own team, your own logistics and so forth and so on. And then once the customer's got it, they then have a responsibility. So yeah, there's a whole flow, isn't there, and a lot of touchpoints?

Indika Edussuriya:
That's right.

Richard:
But managing all those touchpoints and making sure that everything is done in the most sustainable way, it's quite challenging, and we'll get into that, but what's the impact on the environment, then, if e-commerce businesses continue to maybe not have their eye on this?

Indika Edussuriya:
That would be detrimental to all aspects that we discussed earlier and mainly due to the size and scale of influence of an e-commerce business that it can wield. So obviously, there will be issues of business resilience as well to continue in the same manner during and after transition to a new way of doing business. It's obvious, isn't it? Consumers are changing, business entities are changing, hence what doesn't change becomes obsolete.

Sustainable development and ESG has become a new source of competitive advantage generation as well. So those who embrace it in its true form will be better off in terms of corporate value addition during the medium to long term, so especially when you're considering the next two to 15 years. And it means a lot to have an edge over competition no matter what the business model is. One of the major issues is considering business continuity or the going concern in conducting business as it was. There will be legal implications as well. If you look a bit back, not far, but 2014, 2015, some of these things are nice to do things, corporate social responsibility programs or green marketing programs. But they're not anymore. There's legal obligations around them.

Richard:
Yeah. Yeah, yeah, yeah.

Indika Edussuriya:
There are quite a few legal frameworks, for example, the TCFD or the Task Force on Climate-Related Financial Disclosures, it will be effective legislation in the UK from 2024. They go on largest corporates and mandate the financial material aspects of sustainable development. Then also in the EU, which is more comprehensive, the CSRD. And we would feel the effects of all these legislations even in where we operate from.

Richard:
Yeah. I mean, there's a lot of things there, but I think ultimately as an e-commerce store, I think listening to this and just thinking about we're trying to make a profit as a business, we want to be profitable. That's a number one priority or right up there. But I think for the guys that are listening in, well, how will embracing what we're talking about, the sustainability, help the profitability and the customer appeal of your particular brand?

Indika Edussuriya:
Yeah. I think that there are quite a few ways of making profits there. One is the bottom line and then another would be the relationships that you've developed and then also the customer appeal and, as you said, the indirect profitability. Now, I think it's good to explore this further by taking an example. And I was thinking, "What better example than eComOne itself?"

So from an outsider's perspective, but who comes into contact with eComOne on a daily basis, I see a company that is vibrant, energetic, a diverse set of people. And it doesn't happen on its own. There's a combined and concentrated effort in initiating that type of HR efficiency. I see the company making an impact on employees' professional development and personal lives. I see local social engagements. You see school children coming in for visitations. They're inspired. You see university undergrads coming in for visits. You're imparting technical know-how in e-commerce to them. So you're molding a future generation. You have flexible working hours, reduced transportation and office footfall. So you're actually looking after your emissions as well.

Richard:
Yeah.

Indika Edussuriya:
You are working on creating networking events which adds value to the other working professionals, sharing knowledge, empowering others. There's a list that goes on. But then, so if you call them the right things, you are doing such a lot on a large canvas. It's like they are spread around. You're doing such a lot in the right direction. It's about understanding your materiality and slotting these bits and pieces and creating that cohesive or consolidated effort. And that's what needs to be done. And once you understand the material topics, it's about consolidating, as I said, understanding where there are gaps. This helps in directing limited resources as well to where the focus should be. And the next thing is disclosing. So when you go through this streamline process in achieving this type of category improvement and synchronization, profitability, consumer approval, customer appeal naturally will follow it. You don't even have to put an extra effort into it.

Richard:
Yeah, yeah. Yeah, that's put so well. I mean, for those that are listening, yeah, I'm in a coworking space in the UK, in Lincolnshire, and Indika is in the same building. So I see Indika most days, maybe not every day, actually, but a couple of times a week, don't I? And obviously, you've become very good friends of myself and quite a lot of our team. We see you day-to-day. I didn't know you were going to say all that. That's quite a-

Indika Edussuriya:
Yeah. I was thinking how to answer this question and it just popped up, eComOne, which is a really good corporate citizen, in my opinion.

Richard:
Thank you, thank you, thank you. We do try. We do try. Yeah. We've got somebody in on work experience at the moment, actually, in the business, and we've had some of the team out doing presentations to the local business community today as well, actually. So it's been a busy few days. Okay. So obviously, you mentioned a few things there and how companies can do different things, but what are some of the other ways that companies can become more sustainable within their business?

Indika Edussuriya:
I think the term "most sustainable" is interwoven with material issues and material topics of the company. So the number one criteria for success, to become more sustainable is to understand the double materiality from the company's unique perspective and be transparent with the findings. So there are various stages that we have passed through in this journey of formalization of sustainable development and ESG schools of thought. Some companies have programs around green marketing, as you know, greening the marketing mix, some used to call it. And most of them were governed by objectives of gaining an edge over competition for linear top line or bottom line growth. And there was and still is CSR or corporate social responsibility programs which are still running. But the sustainable development and ESG is different to these earlier corporate citizen or responsible business concepts. It's in the consideration of double materiality, integration of sustainable development to corporate value addition ambitions and strategies and having a continuously improving, monitorable, accountable and governance framework around it. I think that's the difference between corporate social responsibility, green marketing and sustainability.

Richard:
Yeah. It's a bit of a minefield, isn't it? There's a lot of different things, a lot of different things to think about.

Indika Edussuriya:
It actually makes sense, though. It's not something which doesn't fit into each other. It fits extremely, really well with corporate valuation principles. So when you actually get into it, you see that it's actually enhancing the corporate value addition strategy and implementation and actually enhancing your capabilities within the organization.

Richard:
Yeah, yeah. So I think a lot of people that will be listening are thinking, "Well, where do I start?" It sounds quite a challenging task. I think I'm probably overthinking it, to be fair, because it just seems quite natural to us that we're investing in different things and the way we do things and things like that. But what are some of the challenges that you see that prevent businesses from becoming more sustainable, and how can they potentially overcome them?

Indika Edussuriya:
There could be a few issues or hindrances which act as barriers. One of the most common would be overthinking and also, some companies, they try to do it all overnight. So when you sit down, when the corporate think tank starts considering all the implications in becoming more sustainable, some of the questions or main issues that are voiced around the table are fascinating. I can list some of them. And then the thinking is too broad. Sometimes it leads to deliberations and more deliberations. Companies become overwhelmed by the sheer size of the project at hand.

For example, companies start thinking about the budget that is required for the overall project, which is required for overnight success. And then they start matching that with their annual cash flow projections. They start looking for sustainability or ESG manager in the market and find that they are too expensive or that there aren't any in the location where they are. So instead of this, what they should understand is that this is a continuous improvement journey and it should enhance current internal capabilities and available resources and also support to enhance capabilities and open new doors of resource sourcing.

And secondly, what should be done is there shouldn't be an overlooking. You shouldn't be overlooking what is being done right. You should be trying to consolidate what is being done right and the unique materiality and start discussing and engaging stakeholders as well, because stakeholders are an important part in this whole journey as well, and we should get them involved. And I think third would be, well, trying to develop an ESG or sustainability strategy. It's the strategy which is alienated from the corporate valuation strategy, as I mentioned earlier. So these should be two and should be strategized together, planned and implemented together. Sorry.

Richard:
So I'm right in thinking, then, that you're going into these companies and doing these workshops with them, is that correct?

Indika Edussuriya:
Yes, Richard. So what we do is we go in and we tell them that it's... We don't encourage them to go on consulting or go on employing somebody especially for sustainability. What we believe and what we try to empower them is we try to empower their functional heads, their internal resources with the know-how, the technical capability in adopting sustainability into their functions. So once you guide them in one year or during a certain period of time, they should be able to take it on themselves, and they should be able to run the program themselves.

Richard:
Yeah. A big sort of education piece, I think. Yeah. It's quite daunting from the outside, but then if you start implementing things, like any project, in a way, and you start living and breathing it and understanding it... I know we've implemented a few things this last year or two that were very foreign to us, maybe, not on sustainability but on other things that I can think of.

When you start any sort of project or any change in a business, it's that change or that new thing is where quite a lot of worry and concern... And I obviously think of budgets and time and impact. But as you start rolling into it, it starts becoming quite an exciting part of the business, doesn't it? Yeah. So I think like anything, I'm a big technology fan in anything that I'm involved with, so how can technology help businesses become more sustainable?

Indika Edussuriya:
Oh, I think in quite a few ways I can think of. For example, you can create platforms for sustainability and even for collaboration using technology, and we have seen that to be quite effective. So using technology to create a platform for collaboration and also collation of sustainability and ESG data, especially within an organization's functions, which allows you to, in real time, collate and be ready with your disclosure data and then with your sustainability report, for an example. So it helps in aligning the business.

Secondly, I would say that the technological advancement helps in increasing or enhancing the efficiency within that industry itself. So there are quite a few advances in technology that has been used in creating sustainable opportunities within various industries. Then also, creating transparency capability and also to quantify results around sustainability data, increasing comparability and then level of alignment, so through the use of technology will be much better. So achievement of companies and leaders within the sustainability transition will be appreciated with more use of technology and then transparency.

Richard:
So I think something that is on my mind for the last year or so, really, a lot of companies that have spent time becoming a B Corp. And you see it more and more and more. More and more and more companies are becoming B Corps. I know we've had a couple of conversations about this, but I'm keen for you to let our listeners know your sort of thoughts on businesses becoming a B Corp, because I think a lot of people are maybe, "Oh yeah, we need to be a B Corp." But I think there's a lot to be chatted on here. So what are your opinions on businesses becoming B Corp?

Indika Edussuriya:
It's a diplomatic concept. I think it's a nice tool or a checklist to have, B Corp. Going through the process, it helps especially small, medium enterprises in starting off on a sustainable development journey, in setting up an ESG framework, and also in consolidating and correcting the path they take to sustainability, which is effective, actually, in reducing resource waste. But then again, however, becoming a B Corp would not be a term that I would use as a fulfillment or a pinnacle of achievement. It's possible to critically acknowledge the becoming B Corp tag if the audit or the checklist framework can achieve a level of transparency, one.

And also, integrity and accountability of a certification system are required to have a good level of scrutiny. A good example would be to look at the ISO certification systems. There are processes that are transparent. There are standards which actually govern the audit resources, the processes of the awarding bodies. There are methodologies that are available for public scrutiny. And then also each ISO certification awarding body is governed by UKAS, for example. And UKAS actually reports and is accountable to International Accreditation Forum. So there are several levels of accountability, and I don't see that in B Corp. So it's always there. So the issues that-

Richard:
So you would suggest people look at the ISO certifications maybe more so? Yeah?

Indika Edussuriya:
See, when it comes to ISO certification, which is for a small, medium enterprise, I won't advise them to go and get all the ISO certification. It's actually not practical sometimes because it needs quite a lot of time on the certification itself. But rather you can take learnings from those certification methodologies and then you can actually create your own processes and systems which are actually suitable from your own unique perspective, and then you create your strategy. So that's what my advice to an SME would be.

Richard:
Yeah. I think a lot of people will be thinking which way to go with things and where to start and what to look at. I know there's a lot of talk about B Corp, and I see a lot of companies seem to be ticking certain boxes, but the reality is are they really doing things for the right reasons? An interesting conversation, I think, there. Yeah, yeah. So on the legal side, so what are the legal obligations and implications for companies that they may have to face due to sustainability and ESG developments? What's the legal side of things?

Indika Edussuriya:
So one of the main concerns or the legal obligations in the UK would be the TCFD or the Task Force on Climate-Related Financial Disclosures, which comes into effect from 1st Jan, 2024. And that would have a direct impact on about 12,500 large-scale organizations, the finance industry. So at the moment, even a small, medium enterprise becomes part and parcel or is within the supply chain of one of these large-scale organizations which are mandated disclosure. They become obligated as well so that there'll be implied obligation for the small organizations. One of the other legislations that would be applicable and would be indirectly applicable as well would be the CSRD in the EU. That's quite comprehensive. Actually, it's more comprehensive than the TCFD. It looks at both perspectives, the double materiality, and considers about 60,000 odd companies. And obviously, their value chains and supply chains will also become involved in the whole process.

And then in the USA you would find the Securities and Exchange Commission coming up with disclosure requirements. So out of these large economic regions, I think three of them have already agreed that there should be legal obligations. And it's like there's a formalization and legalization of the mandatory nature of compliance around sustainable development. So from an optional strategy and nice to do things, it's about creating compliance obligations and mandating disclosure. So that's where we are heading. Disclosure and then having a framework is one which is being mandated, and the second thing would be assurance. So whenever you disclose, whenever you come out and say that you're sustainable and that you're aligning with a UN Sustainable Development Goal, you would have to get your disclosure assured by a third-party assurance company.

Richard:
That's correct. Yeah, yeah.

Indika Edussuriya:
So that's the other key thing, and that's one of the key developments that we see. So it's very similar to the accounting or the financial practices where you get your final accounts audited by a third party.

Richard:
Yeah. Yeah, same sort of thing. You got to be, what is it, a certain turnover level, isn't it? You've got to have them audited. So for these, the things you just talked about, is that a certain headcount business, then, that has to have that? Is it a certain size, or is it just about the people, headcount?

Indika Edussuriya:
Yeah. So the TCFD actually is applicable to a large-scale undertakings which are listed in the Stock Exchange. And what ideally happens is when these listed companies become mandated, obviously they would look at their supply chain and the value chain because they have a responsibility to ensure that their value chain and the supply chain is in alignment as well. So they would start asking the small and medium enterprises that come in their supply chain about their alignment on sustainability development principles. So obviously, all the small and medium enterprises will have to start working on their sustainability programs to answer those questions.

And then also, at the moment, for example, if a small, medium enterprise goes to a financial institution, insurance underwriting for their short-term, or medium-term, long-term financial requirements, they'll be asked the question whether you have an ESG framework in place. Do you disclose any information? Because that actually reduces your risk. And your risk is reflected in the amount of interest that you have to pay to that financial institution for the finance you do that you take, which actually gives you a good bargaining point or a chip if you have that embedded. And also, your risk rating goes down, obviously. So it works as compliance obligation as well as an employee obligation.

Richard:
Yeah. No, that's good. That's good. So last couple of questions, Indika. Yeah, I think it's an absolute hot topic at the moment, and it has been for some time, but the next 12 months, how do you expect sustainability to change? Or in terms of businesses adopting things and e-commerce particularly, anything you would say to our listeners to keep an eye out for?

Indika Edussuriya:
I think other than what we mentioned, Richard, so there's a certain value addition that that could be done from e-commerce businesses. It's about disclosing the information about the goods and services that they carry on their platforms, where the subscribers, the consumers will be made aware about sustainability principles that have been adopted, carbon emissions, how aligned the producers are. Maybe it would be a bit various.

Richard:
So like a score next to the product in effect? Yeah.

Indika Edussuriya:
That would be ideal. It's not easy to do that, but that would be ideal. And you could also develop your own second-party audit frame where you send out a questionnaire to your suppliers or to suppliers, so businesses and service providers, and you can start scoring them on it. And then, actually, you can display that next to the product or the service. So there are various things that you can do, and I think one major impact that you can have is in the influence that you wield in the consumer decision-making, the thinking process.

Richard:
Yeah. I think you've just got to be more conscious, haven't you, of who you're doing business with, what their practices are, the way they treat their people, the whole process? Let's be realistic as an e-comm store owner, any business owner, you need to have your eyes open to who you're doing business with and the way that people are acting around their product, their people, and where they are in the world. It's too easy to take advantage of different situations. Whereas, we've all got a responsibility, haven't we, in reality? And ultimately, I think people generally, they want to do business with people that are doing business sustainable and doing it ethically and running a good business. So I think they're good people to be involved with, and I think the people that are doing that are going to be even more successful.

So I think it's good to be sustainable and investing in your people, but ultimately it's just good to be a good person and do the right thing. And with that, I think, you've more chance of having a more successful business because people are attracted to working with people that are like that, I think. Yeah. So yeah, it's quite an exciting time in e-commerce, I think, because I have seen... I did another episode a few months ago with a company that do do the sort of labeling across the supply chain. So then that particular product has a score. So there's companies out there that do do that.

Indika Edussuriya:
Yeah.

Richard:
Well, thank you for coming on the show, Indika. I like to finish every episode with a book recommendation. Do you have a book to recommend to our listeners?

Indika Edussuriya:
Of course. I recommend the own book, what I've written and I presented to you.

Richard:
Yes. Okay. Yeah, yeah, yeah.

Indika Edussuriya:
So actually, it's quite simple. It simplifies the whole ESG journey. And any person who's reading through it, who's following up with each step of the process that I recommended can become a sustainability consultant or you can adopt your own sustainability framework within the organization through it.

Richard:
So just remind me again what the book's called just for the listeners as well.

Indika Edussuriya:
So it's called ESG for SMEs. It's actually focusing small, medium enterprises, that they don't have to spend on consultancy or buying expensive solutions to align themselves.

Richard:
So is that available on Amazon?

Indika Edussuriya:
It's on Amazon, and it's £9.99, I think, but that's only to cover the cost of production.

Richard:
And as Indika said, I do have a copy of his book, and it is one hell of a book, I have to say. It is absolutely so thorough. So if this is a topic that is of interest or even more than just of interest, a topic that you really want to go deep on, Indika is one of the world's experts and happens to be in my building but has written the book, literally, the book on the topic. So feel free to buy that on Amazon. We'll link that up to the episode so you guys can buy that as well. Well, thank you so much, Indika, for coming on the show. For the guys that want to find out more about you and connect with you, what's the best way to do that?

Indika Edussuriya:
I'm on LinkedIn, Richard. I can share my ideas and then help others as well.

Richard:
Yeah, that's brilliant. So feel free to connect with Indika on LinkedIn. Well, thank you for coming on the show, and I look forward to catching up with you in a few days' time. All right.

Indika Edussuriya:
Thanks, Richard. Thank you and see you soon.

Richard:
Thank you. Bye-bye.