Aligning Incentives for Sustainability & ESG with ESGDAO

Eric Hansel knows a thing or two about sustainability. He spent nearly a decade trying to bring sustainability to the gaming industry, working with casinos to shrink their energy footprint without sacrificing revenue to do it. It’s exactly this kind of win-win approach that he’s now taking to web3 and the environment.

The greenwashing problem

There is a rich irony in the fact that now, as the world seems more environmentally conscious than ever, that we should find ourselves worrying about greenwashing. The practice of shaping marketing materials to an eco-friendly direction solely for the sake of revenue strategies is a big problem, and one that is not likely to stop anytime soon.

This is also a problem that Eric is heavily invested in. Through ESGDAO and The Scubaverse, he is hoping to bring forth new ways to promote sustainability, while also keeping incentives aligned.

He would be the first to tell you that, just as greenwashing for the sake of brand reputation without really making much of a real impact is unacceptable, so too is it unacceptable for companies to be expected to make a tradeoff between revenue and sustainability. After all, why does doing good and making money have to be mutually exclusive?

Aligning the incentives

“Imagine that there are three buckets of people,” Eric began telling me on a recent call, “Bucket 1 is your classic Scrooge McDuck. He just wants money and more of it, doesn’t care about anything else. Bucket 2 you’ve got your regular consumer, they like the environment and care about it, may not be the biggest activists but it’s on their mind. On Bucket 3 you’ve got some serious activists, and they care about the environment and also social issues, like diversity, inclusion, social equity, etc.”

“The goal is that you create a project that serves all three people. For instance, renewable energy projects that deliver tax-advantaged financial returns. Now Scrooge is happy — he’s getting revenue along with a big tax write-off. Environmental benefits are coming out of this, so your consumers are happy as well. And finally we have social benefits that come out of this as well, including new jobs, healthier communities that don’t rely on a fossil fuel supply chain. Everybody wins.”

So this begs the question: why aren’t we doing it?

The issue with ESGs

Environmental, Social and Governance (ESG) criteria are used to screen investments to determine if they are providing value for stakeholders. In other words, beyond simply earning money for shareholders, are they also providing benefit across environmental, social and governmental dimensions. As of this writing, globally over 30 trillion dollars are in ESG investments, a staggering amount to be sure.

So what’s the problem? According to Eric (and many other activists in the field), the bar for ESGs is just too low. Companies can easily pass ESG criteria, oftentimes by buying their way into it, for instance by purchasing carbon offsets. So this begs the question, if the company receiving ESG certification is getting that simply because they paid fees to all the right places, is that company truly a pillar for what the ESG movement is about?

“Of course not,” Eric told me recently, “And that’s why there has to be a change here.”

ESGDAO and the Scubaverse

“I don’t think shaming people works, or that talking negative works,” Eric reflects as he thinks of the best way to approach the problem, “Rather, I think showing people that there are solutions that make sense to everyone — that benefit everyone — that’s the way to go.”

“You just have to meet people where they are, and give them the bridge to where they need to go and to what works best for them. That’s how you make change.” — Eric Hansel

ESGDAO, a DAO aimed at solving the current ESG shortcomings, is near and dear to Eric’s heart. The goal is simple: create an ESG rating system that adapts in real-time and is managed as a DAO, with users and contributors determining how to best assess the ESG compliance information. The thinking is that a DAO will be flexible enough to change over time, but also transparent and open enough to challenge loopholes and disingenuous ES-criteria when they arise.

In tandem with this effort, Eric is also working on The Scubaverse, which is an immersive gaming experience that lets users take a virtual dive into the ocean where they learn about coral reefs, plants and types of fish. The best part? Users can interact with the game to earn tokens, which can be leveraged into ocean conservation and other environmental initiatives that make direct impact on the real world.

So what’s next?

Eric is hard at work on both ESGDAO and The Scubaverse. Recently, the first trailer of the Scubaverse was dropped on YouTube, which you can see here.

Also, Eric joined The Movement DAO podcast recently to discuss these issues in more depth, which you can listen to here, or on Spotify, Apple podcast, or iHeartRadio.

To follow ESGDAO on twitter, find them at their handle @esgdao. And stay tuned!