In an interview with BW SustainabilityWorld, Aditi Balbir, Co-founder of EcoRating  discusses  EcoRating’s approach to disrupt traditional assessment frameworks by leveraging  AI/ML and Big Data techniques

 With a background in ecotourism through ventures like V Resorts, Aditi shares her journey towards prioritising sustainability in business operations. In an interview with BW SustainabilityWorld, Aditi Balbir, Co-Founder of EcoRatings, delves into the company’s journey and its pivotal role in shaping sustainable practices in the business landscape. She highlights the evolution of her perspective over time, emphasising the evolution from traditional business models to ones that embrace circular economy principles and prioritise environmental sustainability. Drawing from her experiences, she highlights the importance of transparency and accessibility in sustainability, which ultimately led to the inception of EcoRatings.

What inspired your journey towards prioritising sustainability, both within V Resorts and beyond? How did your early experiences shape your vision for Eco Ratings and its mission to empower consumers with transparency and sustainable choices?

V Resorts was an ecotourism-focused venture,  We put a lot of effort into sustainability, even with V Resorts, because we believed in a circular economy model. It wasn’t just about tourism; it was about creating opportunities for entrepreneurship and ensuring gender diversity in our workforce. We were also committed to environmental initiatives, ethical governance and anti-bribery policies. Our focus extended beyond just running a hotel. When you look at tourism, it’s fascinating because it encompasses everything—from infrastructure to green mobility and IT. It’s like covering all industries at once. Even before starting this venture, I had a strong sense of sustainability. However, I noticed that people had various perceptions of sustainability. Some industries were making significant progress, like fashion and clean beauty, but others seemed to use sustainability more as a CSR activity.

My concern was the lack of transparency and accessibility. If I didn’t understand sustainability, how could I make informed choices about what I wear, eat, or breathe? That’s where Eco Ratings came in. We aimed to bring transparency to the sector by rating individual products rather than entire companies. We wanted to be transparent about our methodology, data collection, and industry standards. The goal was to empower consumers like you and me with the information needed to make sustainable choices. Now, with Eco Ratings, consumers can understand the environmental impact of their purchases. They can differentiate between sustainable options, like fabrics, and make informed decisions. This initiative fills the knowledge gap and promotes sustainability beyond just lip service.

How does EcoRatings measure the concrete impact of its platform on promoting ESG practices among businesses and consumers? Can you share specific examples of companies adapting their products or operations based on your ratings?

Eco Ratings primarily focuses on providing consumers with real-time information about the sustainability of products. For example, if a consumer is considering purchasing a water bottle, Eco Ratings offers immediate insights into its sustainability. The platform does not require companies to adapt their practices; rather, it informs consumers about the environmental impact of the products they are considering. However, Eco Ratings does offer companies a “Need gap report” if they wish to improve their ratings. This report provides recommendations for enhancing sustainability practices, such as decarbonisation efforts. While Eco Ratings acknowledges the potential for companies to enhance their sustainability, its main goal remains to inform consumers about the sustainability of products. One example of the platform’s impact is its inauguration at COP 28. By presenting at a climate conference, Eco Ratings emphasises the importance of consumers being informed about the sustainability of products, even in such high-profile events. Ultimately, Eco Ratings aims to bridge the gap between consumers and sustainable products, providing transparency and encouraging informed decision-making.

EcoRatings aligns its rating methodology with the United Nations’ 17 Sustainable Development Goals (SDGs). How do you ensure your ratings remain relevant and adaptable to evolving sustainability concerns and priorities?

EcoRatings aligns its rating methodology with the United Nations’ 17 Sustainable Development Goals (SDGs), ensuring that its ratings remain relevant and adaptable to evolving sustainability concerns and priorities. The platform leverages existing frameworks, such as the Global Reporting Initiative (GRI), and Standards and Business Responsibility and Sustainability Reporting (BRSR) adopted in India, which are all based on the principles of sustainability outlined by the UN.

By integrating the SDGs into its technology platform, EcoRatings can quickly adapt to any framework. The platform covers all points within the SDGs, mapping them against other rating agencies like  S&P and Morgan Stanley Capital International (MSCI). This comprehensive approach ensures that EcoRatings’ data and coverage surpass those of other agencies, as it aims to encompass all aspects of sustainability outlined in the SDGs. Furthermore, EcoRatings’ technology platform is designed to accommodate various sustainability metrics and priorities. Whether it’s measuring carbon emissions, social impact, or other sustainability factors, the platform seamlessly integrates diverse criteria. This flexibility enables EcoRatings to respond promptly to new frameworks or standards, such as those introduced by the Bureau of Indian Standards (BIS) and provide accurate assessments based on different criteria.

How are the specific sub-indicators within each SDG weighted to arrive at the final rating?

 To arrive at the final rating for each Sustainable Development Goal (SDG) and its specific sub-indicators, we employ a weighted approach that considers multiple metrics provided by the United Nations. Before the new set of UN SDGs is introduced post-2030, the 246 sub-indicators designated by the United Nations represent the most comprehensive data points available to assess each goal’s progress. For instance, let’s consider SDG 1, which targets the eradication of poverty. One of the sub-indicators involves measuring the number of individuals employed below the international poverty line. Gathering such data, particularly from the labour class, can be challenging. To address this, we focus on two key metrics. Firstly, we examine the number of individuals earning below a specified income threshold, such as Rs 20,000. Any individual falling below this threshold is considered to be living in poverty. Secondly, we assess the gender ratio within this group to ensure gender equity in employment opportunities. Additionally, we compare the average salary of labourers in a specific industry to industry standards to gauge fair compensation practices. For example, if we’re evaluating a rice manufacturing company, we analyse the salaries of operators working in rice mills and compare them to industry norms. Each SDG may consist of several sub-indicators, typically ranging from seven to eight. However, due to our tech-centric approach, we typically cover three to four of these sub-indicators. It’s crucial to note that our methodology relies on independent audits rather than relying on data provided by the companies themselves. This ensures the objectivity and integrity of our ratings, as we do not request any information from the companies being assessed.

How does the rating system use artificial intelligence and third-party applications to derive sustainability ratings, and what factors are considered in determining these ratings?

Speaking of the machinery, the rating system is primarily based on gathering data from the world wide web, including proprietary data such as industry reports. This data is processed through a large language model or AI, essentially artificial intelligence platforms. These platforms are trained on sustainability parameters. Additionally, third-party applications like Google Maps, Google Earth, plastic tracking, and waste tracking tools are used to verify data and ensure the traceability of products and raw materials. The final rating is determined based on various factors, as exemplified by the comparison of wage rates in an industry. If an employer pays below the industry average, they receive a lower rating, while paying above average results in a higher rating. This process illustrates how ratings are derived. Behind the scenes, the system relies on a generative AI platform to analyse and process the data efficiently.

How does EcoRatings handle situations where data on certain sustainability factors is unavailable for a particular product or service?

EcoRatings utilises artificial intelligence (AI) to address situations where data on certain sustainability factors is unavailable for a particular product or service. For instance, when comparing hotels in Uttarakhand with varying availability of electricity bills, AI comes into play to extrapolate missing data points based on available information from similar properties. By analysing factors such as the number of rooms and known electricity bills, AI can estimate the electricity consumption for properties lacking specific data.

This approach highlights the necessity of AI in handling incomplete datasets and ensuring accurate sustainability assessments. Unlike some industry-specific rating systems that focus on limited criteria, EcoRatings provides comprehensive evaluations covering environmental, social and governance aspects, along with specific scores for Sustainable Development Goals (SDGs). This comprehensive approach ensures that consumers receive detailed insights into the sustainability performance of products or services, even when certain data points are missing. EcoRatings leverages AI to fill gaps in sustainability data, providing consumers with thorough and reliable information to make informed choices about products and services.

How does EcoRatings approach the challenge of comparing sustainability across diverse product types with inherently different environmental impacts?

 When it comes to comparing sustainability across different product types, we have a specific approach. We only compare products within the same industry. For example, we wouldn’t compare an Adidas shoe to an electric vehicle because they’re completely different industries. That would be like comparing apples to oranges. Instead, we focus on comparing Adidas shoes to Nike shoes or other brands within the footwear industry. The reason for this is that each industry has its standards and environmental impacts, so comparing products across industries wouldn’t be meaningful. While we can gather absolute data on factors like carbon emissions for individual products, meaningful comparisons can only happen within the same industry. Our goal is to provide consumers with relevant and reliable sustainability assessments within specific product categories. By adhering to industry-specific standards, we ensure that our comparisons are meaningful and empower consumers to make informed choices. EcoRatings ensures meaningful sustainability comparisons across diverse product types by focusing on comparisons within the same industry and adhering to industry-specific standards.

How does EcoRatings support companies in their sustainability transition process, and what role does it play in overcoming scepticism from small businesses, regarding the adoption of such technology?

 EcoRatings primarily serves as a data platform providing insights into the current sustainability landscape for businesses. Rather than directly supporting companies in their transition towards sustainability, we offer status quo reporting and generic suggestions tailored to specific sectors. Think of us as akin to a Bloomberg Terminal existing within a McKinsey framework; we provide data, while the actual decarbonisation process is typically facilitated by consulting firms. While we do not guide companies through the transition process, we do offer ongoing scoring, allowing businesses to track their progress and make informed decisions based on their performance. However, our involvement ends here; we do not delve into the intricacies of technology adoption or transition strategies. This responsibility falls within the domain of consultants who specialise in guiding companies through such transitions.

Despite our role as data providers, we do offer suggestions for decarbonisation strategies. For instance, we may recommend transitioning to green energy sources, such as biomass for rice manufacturers. However, the implementation and execution of these strategies, including vendor selection and transition management, remain the purview of consulting firms equipped to handle such complexities and client queries effectively. while EcoRatings offers valuable data-driven insights and decarbonisation suggestions, the actual transition process and technology adoption are outside the scope of our services, instead being handled by specialised consulting firms.

How does EcoRatings uphold transparency and credibility in its rating system, distinguishing itself from other rating agencies and mitigating concerns of greenwashing?

EcoRatings addresses the concern of greenwashing by prioritising transparency and credibility in its rating system, thereby building trust with stakeholders. The company innovatively ensures the authenticity of its ratings by acting as an auditor of green claims made by companies. Unlike other rating agencies, EcoRatings employs technology to conduct audits, verifying claims such as the origin of materials like plastics sourced from locations such as the Maldives. Transparency is a cornerstone of EcoRatings’ approach. The company adopts a “white box” approach, allowing stakeholders to see the inner workings of the rating system. When viewing the ratings for the first time, stakeholders can access detailed information, including numerical ratings and ESG metrics such as carbon emissions. EcoRatings also provides a dedicated microsite for each product, offering comprehensive data on its performance against sustainability goals. This includes insights into hiring practices, such as the employment of local workers and adherence to industry standards. By ensuring the credibility of its ratings through rigorous auditing and providing transparent access to information, EcoRatings fosters trust among consumers and stakeholders alike.