How will the European Union sustainability reporting requirements affect the drone industry?

The New European Sustainability Reporting Space 

Corporate sustainability reporting is rapidly evolving worldwide. Previously relying on a wide range of industry-led reporting systems, standardization is now becoming a reality, especially in the European Union (EU). 

An important milestone was achieved earlier this year, when the EU Corporate Sustainability Reporting Directive (CSRD) entered into force. Large public interest companies will be required to report on their 2024 ESG metrics and provide data in a machine readable format (XHTML) to the European Single Access Point (ESAP). Progressively until 2028, more companies will be required to report, including non-EU companies operating in the European market.  

Within this space, the European Sustainability Reporting Standards (ESRS) provide an official comprehensive framework for sustainability reporting. However, when an impact, risk or opportunity is not sufficiently covered within the standard, businesses may need to use additional sector-specific or even develop entity-specific disclosures.

Disclosures comprise quantitative and qualitative data on environmental, social and governance (ESG) matters, covering short, medium, and long-term horizons and the company’s entire value chain. Assurance of ESG data will be provided by statutory auditors (legally required) or an accredited third party. Currently the standard is limited assurance, but in the future, reasonable assurance may be required, a more rigorous level now used for financial data. 

What sustainability aspects should the drone industry consider?

Most drone industry organizations are not directly affected by CSRD because they do not reach the size thresholds for mandatory reporting. However, the drone industry, like any other, will have to incorporate sustainability strategies to operate in increasingly sustainability-sensitive markets, in the EU and elsewhere. 

In a relatively emergent industry like drones, sustainability frameworks and the associated metrics, adequate policies, actions and targets are not as consolidated as for more mature industries like textiles, agriculture, oil or gas. There is still a lack of sectoral standards on drones’ sustainability, but progress is being made in related fields. For example, sectoral standards for motor vehicles are under development within the European CSRD framework.  

Prior to reporting, drone businesses have to look at their direct sustainability impacts and risks. Probably the first environmental (E) issue that comes to mind is the manufacturing of drones and their waste disposal. This is indeed important and not much different from other electronic industries. Technical expertise and engineering solutions together may result in procedures that integrate these matters to make the product management process as clean as possible. 

Drones business will also have to consider the social (S) impact of their activities towards their own workforce or workers in the value chain. Similarly, from a governance point of view (G), drone business should consider business conduct. 

Drones business will also have to consider the social (S) impact of their activities towards their own workforce or workers in the value chain. Similarly, from a governance point of view (G), drone business should consider business conduct. 

Nevertheless, the most relevant sustainability matters for drone businesses will be specific to the type of activities that a company is engaged in. These relevant environmental, social and governance matters will be deemed material using sustainability jargon. The challenge is that assessing materiality is not always as straightforward as it seems. 

How does a drone company know what issues are most relevant for its reporting?

A materiality assessment is a critical process that helps companies identify and prioritize the environmental, social, and governance (ESG) issues most relevant to their business and related stakeholders. Incorporating human-centered design principles, this assessment ensures the company's sustainability reports focus on significant impacts and risks, aligning with regulatory requirements and stakeholder expectations. By engaging with internal and external stakeholders, companies can determine which ESG topics are material, enhancing transparency, accountability, and strategic decision-making for risk management and impact enhancement. Ultimately, a robust materiality assessment fosters trust and drives long-term value creation.

Material topics for drone business may comprise topics such as privacy, noise, safety, fear, misconceptions, and other issues affecting communities. For example, for companies providing drone services for agriculture, privacy and noise won’t be relevant matters, but noise and privacy will be of utmost materiality for a drone company transporting medical supplies in urban areas. 

Additionally, drone businesses should consider indirect sustainability implications. The most common is that drone businesses may be required to provide data to larger client companies that buy drones or use drone services to include the drone company ESG data in their sustainability reports. For example, the GHG emissions of a drone service provider may need to be accounted for as part of the upstream emissions of a large company (referred to as scope 3 emissions).  

Drones may also be used as tools for the sustainability strategy of a larger company. For example, electric drones may be used as a mitigation tool to reduce overall GHG emissions for large companies. Similarly, drones can improve safety conditions for workers inspecting infrastructure in hazardous environments, such as heights or hard to reach locations.

How can drone businesses put sustainability matters into practice?

Figure 1. Noise map of the flight path across lake Geneva  and at landing generated with SAFTu

Recently we worked with Rigi Tech to identify and mitigate material community impact of their drone delivery across Geneva lake. In this project, one the most relevant material aspects was drone noise, which we helped Rigi understand and address. Within the ESRS, the standard S3 deals with the issues of affected communities, such as noise or privacy. Early consideration of these aspects have placed RigiTech ahead in the “sustainability race”.

Figure 2: Disclosure requirements of ESRS S3 Affected Communities

What’s next?

The importance of sustainability for drone businesses is expected to increase, regardless of the business size. Even in developing contexts, where regulations are not as strict as in the EU, sustainability matters are essential for business strategy. The effective identification of material environmental, social and governance matters can leverage service quality, community support, prevent sustainability risk, and ultimately, result in great economic, environmental, social and governance impact. 

about the authorS

Pablo Busto Caviedes
Pablo specialises in monitoring and evaluation (M&E), policy research, qualitative and quantitative data analysis. His experience includes a diverse range of social and economic development topics such as rural development, agriculture, or social inclusion. He currently primarily works as an Impact Analyst for evaluation studies at another non-profit organisation.

Denise Soesilo

Denise is an expert in drone technology and social innovation particularly in humanitarian and development settings.

Bo Jia
Bo has supported several digital agriculture projects, covering topics such as M&E, digital finance, e-commerce, drones, pushing for programmatic and strategic approaches to analyse digital products and investments in the organisation.

Edited by Maria Zaharatos

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Is it time to admit that Innovation Pilots don’t work?

In the 16th century, bloodletting was a trusted treatment for many ailments. It was widely used by experienced professionals, despite the fact that it didn’t work and actually killed many patients, including George Washington.

Why wasn’t it obvious that this treatment was a failure, and why was it a go-to treatment for hundreds of years leading up to the 19th Century? Before we shake our heads in condescending hindsight, we should ask ourselves a more current question:  Why do innovators working in the complex varied contexts of humanitarian aid and development continue to invest in Silicon Valley-inspired pilots?

The scenarios are far more alike than we’d like.  One humanitarian innovation lab leader described the portfolio of pilots they had supported as a ‘cabinet of broken dreams’, while another international aid innovation program executive quipped that they ‘would have to get a bigger budget to build more shelves’ to hold all their failed pilots.

It’s not simply that innovation pilots have a horrendous record of success at scale.  My work as an innovation advisor, coaching ‘promising’ pilot programs, has often revealed that pilots lead project teams in the wrong direction and that, frequently, the only path forward is to tear most of the work down and start over with a different mindset.

Can we save the practice of innovation pilots in aid? Or, is it time to admit that pilots, which a decade ago seemed like such a good idea, just aren’t working?

ANSWERING THE WRONG HARD QUESTIONS

The basic idea behind pilots as we know them seems sound. We should as quickly and cheaply as possible answer the hard question(s) that determine the success of our proposed innovation.  In Silicon Valley, where the current pilot practice emerged around 2010, that big question was usually “Is there a market for this idea?”

In the aid sector, the pressing question is more often framed as “does this idea deliver value?” Pilots build out a lightweight version of the idea and then develop measurable evidence of its impact.

However, this is seldom the hardest or even most consequential question in a complex and messy aid context.   

What the sector has found over a decade of investment is that even great pilots fail to work in practice, get adopted, or be sustainably operated. Complex challenges and unanticipated barriers mean that, despite many pilots’ early promise, there is often exactly zero impact.

And yet, most pilots are still intentionally designed to be simple and lightweight, avoiding hard questions like:

• What is the sustainable business model?

• How will the innovation integrate with other technologies and operations?

• Who will actually be motivated and able to adopt the solution?

• Who will remove key political, technical, or collaborative barriers?

• How will key gaps in capabilities and resources be filled?

In a study that Hannah Reichardt and I did for DG ECHO, we identified over 50 complex challenges that technology innovators in the aid sector face, and that need to be addressed over the full lifecycle from ideation to eventual scaled operation.

Pilots are not in the business of asking and answering so many hard questions. So they often finish their time-boxed project without a sense of what their most difficult challenges are, whether they can be addressed, and how they can find a way forward.

To indulge in metaphors again, this is like setting out on an arduous journey through an unmapped mountainous jungle and proudly announcing that you’ve prepared by picking out a good pair of socks…  Potentially useful, but woefully insufficient for the (scaling) task ahead.

POINTING CONFIDENTLY IN THE WRONG DIRECTION

Aid sector innovation programs have begun to recognize the size of this gap and stepped in to fill it. Labs increasingly offer extended funding to support innovators after their initial pilot project. They are also providing skilled coaches to help innovators fill in the missing parts of their solutions. This is a substantial investment, and if it addressed the one shortfall of pilots, it might well be seen as the natural development of the sector’s innovation practice.

Unfortunately, pilots have an even deeper defect. They encourage an immature rush to judgement, thinking that leads to naive views of complex challenges and small solutions that fail to make the best use of precious innovation investments.

As innovators working in a field where people’s lives and wellbeing hang in the balance, it is not enough to simply develop ‘a solution’ to ‘some problem’.  As a matter of strategic policy, we should be looking to address the most important challenge with the best solution possible.

The typical pilot ideation and funding process does little to drive toward this higher standard.  

Pilots are typically rooted in someone’s creative idea.  The idea might emerge from an innovator’s personal experience, a hackathon event, or a call for proposals.  There can be a lot of energy around this part of the work (so innovators like to do it), and the resulting neatly bound ideas are easy to fund (so donors like to support them).

This natural rush to ideation and the enabling pilot funding often sidestep a big-picture view of the challenge.  As a result, innovators fail to see where the most impactful opportunities are or recognize the need for more sophisticated solutions. This harder messier version of a challenge might well not have a quick and neatly boxed-up pilot project as its solution. Hans Rosling in his fabulous book Factfullness relates the story:

““[During the Eboloa outbreak] we had hundreds of health-care workers from across the world flying in to take action, and software developers constantly coming up with new, pointless Ebola apps (apps were their hammers and they were desperate for Ebola to be their nail).””

— Hans Rosling, Factfullness

Unfortunately, pilots, much like bloodletting, are not simply innocent practices.  They actively encourage innovators to indulge in quick ideation and funders to support small ideas without a clear vision of where the biggest opportunities actually lie. We waste the precious opportunity to do powerful important things when our efforts and our funding are diverted into small poorly targeted work.

JUST STOP AND MOVE ON

For nearly a decade, aid sector innovators and the programs that support them have been asking the question “How do we make pilots deliver scale at impact?” And, there have been increasingly sophisticated approaches to the work.

But maybe it is time to just stop. 

Innovation in the aid sector is too important to continue pursuing a structurally unsound practice that doesn’t fit the challenges the sector faces. It may seem radical, particularly given the amount of effort and culture change that has been invested in making pilots part of aid sector practice.  Nonetheless, if pilots don’t work for complex, varied, and messy aid sector challenges, it will be better to look for better practices.

Increasingly, there are changes on the ground that move in this direction. Both innovators and innovation funders are shifting their approach, setting aside key elements of the Silicon Valley-inspired pilot model for a more systems-based approach:

• A climate action organization is systematically mapping out the entire complex ecosystem of organizations, technology, policy and resources in the challenge areas where they plan to invest in innovative action.

• The Response Innovation Lab (RIL) routinely steps back and develops a big-picture view of humanitarian challenges in the countries where they work.

• Innovators working on aid sector goals like localization of purchasing or circular economy in humanitarian aid are starting with solutions that have multiple interconnected parts instead of an overly simplified piece of the solution.

In each case, complexity is recognized and embraced from the beginning. These innovators, and their funding sponsors, see this complexity as an opportunity to claim a bigger more impactful challenge and then develop a sufficiently ambitious solution.

However, these more thoughtful programs don’t throw out all the good lessons about nimble learning that were part of the pilot practice. They move with urgency and learn from action. They iteratively evolve their sophisticated solutions, actively engage stakeholders, and are willing to pivot and adapt along their journey.

The difference is that they have identified the hard parts up front, and therefore look to answer the hardest and most important questions early on. That might be, “What’s my long term funding strategy?”  Or “How will we get this key organization to participate?”

Taking this bigger picture approach to the aid sector’s hard problems and leaning into sufficiently complex solutions will almost certainly result in fewer projects than were possible in the heyday of pilots.  But, it also has the potential to set us on a path to far more initiatives that actually deliver impact at scale on problems that really matter.

about the Author

Dan McClure

Dan McClure has spent over three decades working on the challenge of disruptive and complex systems innovation. He has advised global commercial firms, public sector agencies, and international non-profits in support of their ambitious efforts to imagine and execute agile systems level innovation. He is an author of the book "Do Bigger Things - a practical guide to powerful innovation in a changing world.”

Equitable Pathways to Success: Transforming Digital Education and Opportunity Matching

Digital tools are increasingly vital in addressing complex challenges such as youth skill and opportunity gaps and high unemployment in many parts of the Global South. Catalyzed by adaptations due to the COVID-19 pandemic, the online interface is now increasingly relevant in education from remote learning and online certifications to job matching. 

These technologies democratize access to educational content, benefiting millions gaining internet access each year in emerging economies. As always, along with the promise they hold, there are a plethora of pitfalls. 

CHALLENGES IN EDUCATION AND OPPORTUNITY MATCHING

Numerous platforms have emerged that aim to address youth training needs, such as digital skills in IT, web development etc. They also provide key staffing for businesses and organisations struggling to identify talent in tight labour markets and to fulfill their CSR goals.

Yoma, an ecosystem of partners including but not limited to UNICEF, Atingi, UMUZI, and RLabs is one such example, connecting youth to opportunities for learning and earning in over 8 countries. The government of South Africa has also developed the SAYouth platform to address these issues and tackle the country’s unemployment crisis. Likewise, in Germany, the ReDI School of Digital Integration upskills youth with a migrant or marginalized background to accelerate integration into the digital economy.

Despite the benefits from these types of programs being globally or nationally accessible, they often struggle to localize to the needs of culturally and socially-diverse users, especially those belonging to marginalized populations.  

Delivering effective and equitable matching with opportunities thus becomes a challenge, as candidates from different countries, with different backgrounds and levels of education are exposed to and compete for the same training or earning opportunities.  

Additionally, not all opportunities can be available to every young person, and in many cases spots for learning or earning opportunities are limited. Selection processes, often ‘funnel’-based, lead to many youth being excluded due to mismatches with predefined criteria or aptitude tests specific to the job or training opportunity.

These selection structures pose two major challenges.

CHALLENGE #1 Due to the nature of the funnel, a large population of youth fail to receive benefits as they are filtered out. In doing so, this also reduces the candidate pool for employers. Each failure to match a candidate to training or opportunities can be seen as a lost chance to deliver impact - we run the risk of excluding the most vulnerable, the population we seek to reach.

CHALLENGE #2: Bias in the filtering process further compounds inequities, as candidates may be funneled out by the selection criteria for factors such as educational attainment, language skills, time availability and internet access. Even though this is a data driven approach to identifying the best candidate, there are underlying risks of bias in the selection process. For example: 

• Educational attainment achieved as a proxy for gender: in many contexts, women are less likely to reach the highest levels of schooling. 

• Time availability as a proxy for gender: women with children will have to spend their time on childcare. As such, women might be less likely to be able to commit to the requisite amount of time for training programs. 

• Language as a proxy for ability: if the selection process for training programs includes language assessments, this can filter out candidates who have a strong ability — for example in STEM subjects — but who do not get through the application process because they misinterpret test questions. 

• Internet access as a proxy for economic status: if a candidate only has limited access to the internet, they may be rejected from a training program, but this might well be as a result of their socio-economic background.

Whilst it is logical that training and career development programs look to identify candidates with a suitable CV for their programmes, it is also important to account for such biases during the selection process. 

Indeed, these challenges are not new, as the development sector has long struggled to find a balance within ICT between innovation and equity/inclusivity. So, how can we best leverage the potential of these innovations in education, without leaving the most vulnerable behind?

Revised Applicant Selection Process. Sankey Diagram

RECOMMENDATIONS

Although more complex, the recommended approach offers a suitable opportunity pathway tailored to the needs of each candidate. At Outsight, we build on the range of expertise offered by our network of associates in order to deliver quality results adapted to the specific tasks at hand.

We believe it is developing these kinds of complex approaches that maximizes sustainability, effectiveness and impact.

1. Transitioning from Funnels to Matching

   • A strategic shift: Moving away from funnel-based selection to matching candidates with suitable opportunities can reduce dropout rates and bias in the narrow selection process.

   • Opportunity for all candidates: Rather than narrow criteria focused on a specific role or type of training, programs could evaluate candidates based on diverse skills and match them to relevant opportunities (ie. mentorship and entrepreneurship training or further skills development activities)

   • The result? A larger percentage of candidates access an opportunity and are matched to those where they can succeed. This approach is structurally designed to broaden access to opportunities for a wider range of candidates with diverse backgrounds and talents.

   2. Proactively address bias with a data driven approach

   • Identify and Mitigate the Impact of Bias: A matching approach opens up more paths, considering a richer view of candidates and their context. As such, it reduces the impact of bias in underlying data and data-driven algorithms. 

   • Using Data to Understand Bias: Instead of “weeding out” candidates, aptitude tests could help counteract bias by collecting candidate age, gender, education, location, internet access, education, refugee status etc. The resulting dataset provides an opportunity to better understand the variables and structural biases that determine whether an applicant possesses the relevant skills to pass the test.

   • Exploring algorithms: Using a systems approach and data analysis, programs can develop more complex and useful algorithms that prioritize equity of opportunity for youth.

Ultimately, for programs to be transformative and truly unlock new opportunities for young people, the methodologies they use must place equity at the center. 

about the authors

Denise Soesilo

Denise is an expert in social innovation particularly in humanitarian and development settings.

Maria Zaharatos

Maria is a consultant specializing in research, program design, partnership development, and organizational systems, who champions co-creation and engagement with stakeholders. Her areas of focus are green education, youth empowerment, and workforce development. She has supported various education-focused programs and organizations, including UNICEF, where she helped develop key partnerships and implementation strategy for Yoma’s scaling across the East and South African region.

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