Is Sustainability Reporting Broken?

Stephen Pell, co-founder of neoeco , is set to join the judging panel for the Sustainable Times RISE Awards, bringing a wealth of experience from his work in financially integrated sustainability management. His accountancy expertise and successful launch of NeoEco serves as a compelling case study for start-ups, particularly those eyeing categories like ‘AI Start-up of the Year’ or ‘Fintech Start-up of the Year’ at the RISE Awards. NeoEco is a financially integrated ledger designed to bridge the gap between sustainability insights and financial implications. This allows companies to translate ESG efforts into tangible business value, such as reduced insurance premiums or access to green financing.

Pell's background as an accountant has ideally positioned him to address a gap in sustainability reporting: the disconnect between environmental, social, and governance (ESG) data and financial statements. He emphasises that the robustness of traditional accounting systems means they need to be treated with respect. We should "add to their skill sets", not reinvent them, says Pell. neoeco's platform stands out in a saturated market where basic carbon accounting dashboards have dominated. Pell highlights that many existing solutions are "just dashboards sitting on useless data" and require manual input information, offering limited analytical depth. In contrast, neoeco leverages AI for data processing and mapping, essentially functioning as an ‘AI bookkeeper’ for sustainability data. The firm even uses "two other AI models to check it", ensuring accuracy and trustworthiness.

The Future of Impact

A key differentiator for neoeco is its use of the life cycle assessment (LCA) methodology as its analytical engine. Pell argues that LCA provides a more robust and in-depth understanding of impact calculation compared to average emission factors. He states, "it's our point of view that that's the future of impact calculation". This approach allows for the consideration of multiple impact categories beyond carbon, such as water usage, land use, supply chain risk, and even social impacts like wage gaps, enabling a holistic view of a company's sustainability footprint. neoeco's platform can "flip [between] land use, supply chain risk, local supply chain, wage gap, all of this detailed information you get from an LCA impact calculation".

Pell's understanding of raw materials and their environmental impact stems in part from his brother's significant work in the rare earth metals sector. Robert Pell, Founder and CEO of Minviro, built the company on his PhD research on applying LCA to rare earth element projects to minimise environmental impacts. Rare earth elements are required for green technologies like electric vehicles and wind turbines, but their extraction poses environmental challenges. Minviro provides expertise in this area, developing ISO-compliant LCAs for various metals, including rare earths, and contributing to projects like the Circular System for Assessing Rare Earth Sustainability (CSyARES), which aims to create a blockchain-based traceability system for supply chains. Notably, Minviro was selected by Tesla to conduct a Life Cycle Assessment for its nickel-based lithium-ion cells, with the findings prominently featured in Tesla's 2021 Impact Report. neoeco was founded by both Stephen and Robert with their CTO directly working in both businesses. They received an initial grant of £50,000 from Innovate UK for prototyping, building, and testing in 2022. 

Supply chain transparency for EVs

Pell openly expresses his aspiration for neoeco to "get Tesla over to this system,", believing that all electric vehicle manufacturers (EV)  could significantly benefit. The need for robust, financially integrated sustainability reporting in the EV sector is more critical than ever. Global EV sales surpassed 17 million units in 2024, a 25% increase over the previous year, intensifying pressure on complex global supply chains, particularly for critical battery materials like lithium, cobalt, and nickel. These materials face challenges including fluctuating prices, potential supply constraints, and environmental concerns related to their extraction. In this demanding environment, supply chain transparency is paramount for EV manufacturers to mitigate operational risks and meet sustainability goals. neoeco's detailed LCA methodology and auditable data enable EV firms to not only meet evolving regulatory demands – such as the EU Battery Regulation requiring proof of sustainable sourcing and digital battery passports by February 2027 – but also gain a competitive edge. This level of granularity, far surpassing reliance on CO2 estimates, is crucial for manufacturers aiming for carbon neutrality and navigating dynamic global regulations.

Initially, neoeco targeted the SME market, designing its technology stack to be familiar to users of type-0 accounting software. However, the firm pivoted to focus on larger enterprises after this segment lacked the time, budget, and regulatory incentives to fully engage with the problem. This shift was also driven by the phasing in of reporting regulations that initially target the "biggest, by revenue and by number of employees" companies, creating the most urgent need and biggest opportunity. Pell anticipates a "trickle- down effect" where these regulations will eventually impact SMEs as larger companies require their supply chains to disclose sustainability data.

neoeco's platform is designed for flexibility, moving beyond rigid reporting standard packs. Instead, it uses a ledger with data points that can be manipulated into any reporting framework quickly and easily. This adaptability is crucial in a constantly evolving regulatory landscape, as demonstrated by proposed changes to the  Corporate Sustainability Reporting Directive, which are set to reduce their target from over "40,000 plus companies" to "five or six thousand". Their solution's alignment with disclosure standards of the International Sustainability Standards Board and financial reporting standards is a key driver, as "over half the world GDP of the world's economy is now adopting" these standards, says Pell.

Points of differentiation 

For aspiring start-ups in the ESG reporting space, Pell emphasises the importance of a clear point of differentiation and looking beyond basic dashboard solutions. He advises investors to seek out companies that utilise AI for efficient data processing and robust methodologies like LCA for comprehensive impact calculation. He states,

"AI would be the first thing that I would look for if I was an investor in software".

Pell also highlights the need for convergence between different skill sets within companies, particularly between risk management, financial teams, and sustainability engineers. He believes that sustainability is "not one or the other", but rather that "there needs to be some convergence in the middle somewhere” also emphasising the need for collaboration". He adds that sustainability has "become a professional discipline".

neoeco recently held a significant relaunch week. It formally announced three big partnerships: one with a major accounting firm, another with a significant auditing firm, and a third with a prominent risk management company. This strategic approach underscores the growing importance of integrating sustainability into core business functions and financial reporting.Pell's insights and neoeco's innovative approach offer a powerful example of how start-ups can revolutionise the ESG reporting space. Its focus on financial integration, advanced AI, and comprehensive methodologies like LCA provides a blueprint for companies looking to not only comply with regulations but also drive financial and reputational benefits. 

If you are looking for an opportunity to get in front of a judge like Stephen apply for the RISE Awards.

Apply Here