More funding for sustainability reporting: Sweden’s Worldfavor, an early mover platform focused on building digital infrastructure to support supply chain transparency and cater to organizations’ ESG (environmental, social, governance) reporting needs, has bagged €10.2 million in Series A funding to step on the growth gas.
The Series A was led by SEB Private Equity, which is part of Nordic corporate bank SEB, with existing investors Brightly Ventures and Spintop Ventures also participating. The raise brings Worldfavor’s total raised to date to €13.4 million.
Over the past five+ years, a growing number of supply chain transparence and sustainability reporting startups have been popping up as consumer pressure on ethical and eco issues (not to mention frustration with ‘greenwashing’) has built a head of steam — combined with increased attention and hard reporting requirements from policymakers, such as via EU regulations linked to the European green deal, whereby the bloc is aiming to be “climate-neutral” by 2050.
Worldfavor co-founder and CEO, Andreas Liljendahl, says he welcomes the thickening pack of sustainability reporting players — envisaging a future of rich collaboration and startup opportunity to cater to increasingly comprehensive and intertwined reporting requirements.
“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.”
For now, Worldfavor’s positioning looks like a broader platform play versus some of the more specialized reporting/transparency tools springing up to cater to specific industries or products. “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,” he confirms, noting: “We have multiple stakeholders — the buyers, the investors, the big corporations.”
“It’s sort of a network problem because companies are connected to each other more than ever and we don’t know so much between companies so… if you are an importer of, for example, wine and you need to understand the emissions of the products you’re selling you cannot understand that yourselves — you need to ask your producer and the producer needs to understand the farms in different tiers,” he explains, fleshing out why a platform approach makes sense for cross-cutting ESG reporting across complex global supply chains.
The 2016-founded startup says its network is being used by over 25,000 organisations across 130+ countries to access and share information to support decision-making related to ESG goals — such vis-a-vis CO2 emissions reductions or for responding to human rights concerns.
Customers fall into three main buckets, per Liljendahl: Procurement organizations with a focus on supply chain sustainability; investors & private equity firms needing to do sustainability due diligence on their portfolio and/or on potential investments; and larger businesses that need reporting to wrap their own subsidiaries, also so they can understand the ESG trajectory of the whole 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 says the team tackled the ‘chicken & egg’ startup problem by focusing on getting larger entities on board, leveraging those businesses’ sway over their own supply chains to encourage tranches of suppliers to sign up and start reporting data.
But he argues there are growing incentives for providers to plug in as doing so means they can increase their visibility to Worldfavor’s network of data accessors who are looking for suppliers they can quantify. In other words, having data already accessible via its reporting platform could constitute a competitive advantage. “The providers get the value of sharing information to one or many stakeholders on the platform — understand where they are today and could be able to more easily know how they could improve their own operations,” he suggests.
One important thing to note is that data providers in Worldfavor’s platform are self reporting data — so it’s not actively auditing any of these ESG-related claims; rather it’s shooting for increased transparency (and access to data) bringing some ‘disinfecting sunlight’ and supporting higher standards of accountability. (Though delivery of the latter is likely a fresh startup opportunity for teams focused on innovating around verifying/auditing data — which would be positioning themselves to partner with platforms like Worldfavor.)
“The first basic need is to have an infrastructure to enable information to flow more easily,” Liljendahl argues. “Then we make sure the information is shared with super transparency — who’s shared it, when, and so on, so you can also trace back.”
He says the team has some tools on top doing a degree of analytics and comparisons — to offer some basic checks on reports. But it’s hoping to develop more sophisticated tools, and even some form of automated auditing, whereby it would be applying machine learning technology that could identify anomalous-looking claims or changes to reporting history in order to catch erroneous reporting.
Emissions reporting requirements have already triggered some major scandals so incentives to cut corners (or worse), and pump out ‘ESG hot air’, may well linger like a bad smell, even as increased transparency across industries and sectors should — hopefully — work against bad actors by making make it harder to get away with faking key types of sustainability data.
But for now, Worldfavor’s focus remains on growing usage to shoot for serious scale — so self reporting (vs active auditing) is clearly the more scalable strategy for that. “Maybe a dream in the future is that the information could be self audited but only if we increase the transparency between companies,” he argues, adding: “Our key mission is to create the transparency today that’s missing — completely missing.”
The plan with the Series A funds is growth on all fronts: Data providers, data accessors and the number of data transactions happening in the platform on a daily basis, per Liljendahl. They’re also of course shooting to boost ARR with the customary eye on scaling the startup onto a sustainable footing as a business. “We have big targets,” he adds. “We’re growing at a little bit over 100% when it comes to the annual recurring revenue — and a little bit more, double that, when it comes to the user base. And we are super happy with that.”
Commenting on the funding in a statement, Babak Etemad, investment director at SEB Private Equity, added: “We’re happy to join the impressive team at Worldfavor in their pursuit of raising the bar on sustainability and help organisations share critical sustainability-related information. We are confident that Worldfavor will play a vital role in this industry over the coming decade, and we look forward to supporting them on the journey.”