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Talking ESG: How technology enables reporting agility · PwC's accounting podcast

0:00
SPEAKER_03: Thought Leadership from PWC.
0:06
SPEAKER_03: Best in class is really those organizations that are thinking about how sustainability is going to drive top-line growth.
0:12
SPEAKER_03: Sustainable businesses tend to last longer.
0:15
SPEAKER_03: That's the fundamental definition of sustainability, right?
0:18
SPEAKER_01: Hello.
0:19
SPEAKER_01: Today we're back talking ESG to cover a hot topic for sustainability reporting preparers.
0:25
SPEAKER_01: How companies are using technology to enable their processes.
0:30
SPEAKER_01: This is PWC's Accounting Podcast.
0:38
SPEAKER_01: I'm Heather Horn and thanks so much for joining us today.
0:42
SPEAKER_01: As the sustainability reporting landscape continues to evolve, many preparers are grappling with competing priorities.
0:50
SPEAKER_01: Not only do you have to learn new reporting standards, you are also charged with standing up processes, controls, and governance over new disclosures.
0:59
SPEAKER_01: Disclosures that can carry a lot of reputational importance.
1:03
SPEAKER_01: Further, preparers are often managing constraints due to lack of data, impending regulatory timelines, and a shortage of talents to build out their organizations.
1:13
SPEAKER_01: In this context, better technology can either seem like a relief, or it could also seem like simply another work stream on top of everything else.
1:23
SPEAKER_01: Again, spoiler alert for this episode, it's not just something to add on top of everything else you have to do.
1:30
SPEAKER_01: It's probably one of the most critical components of your success.
1:34
SPEAKER_01: My guest today is talking with clients every day about how best to leverage technology and digital capabilities.
1:40
SPEAKER_01: Sammy Longshwan, partner in PwC's Consulting Solutions Sustainability Practice, came onto the podcast to talk to me about the current state of technology enablement and to share his insights into how to maximize technology is a key component of your sustainability reporting strategy.
1:59
SPEAKER_01: With that, here's my conversation with Sammy.
2:02
SPEAKER_01: So, Sammy, welcome to the podcast.
2:03
SPEAKER_01: So nice to have you on.
2:04
SPEAKER_01: And such a great topic we're talking about today, because I think hopefully getting a little bit practical here.
2:11
SPEAKER_01: But before we get started, I thought it might be helpful for you to just give a bit of your background and then sort of what you're focused on right now with our clients.
2:19
SPEAKER_03: Sure, happy to.
2:20
SPEAKER_03: No, uh so the easiest way to describe me, I've been in sustainability now for about 23 years.
2:25
SPEAKER_03: So entire world has been sort of that intersection of digital and ESG.
2:29
SPEAKER_03: So I like uh like to tell people I was counting carbon well before anyone cared.
2:33
SPEAKER_03: Uh I actually remember a client of mine telling me to take it off of a report because it didn't fit, it was too big of a number, and now it's core to their strategy.
2:40
SPEAKER_03: So yeah, no, been here, done work all over the place from Papua New Guinea to Alaska in every sector.
2:45
SPEAKER_01: How'd you get into sustainability in the first place?
2:48
SPEAKER_01: And it probably was not called sustainability then back back then it was environmental engineering.
2:52
SPEAKER_03: So I I I decided I was gonna be an engineer because I've had a, you know, that's that's just how my mind works.
2:59
SPEAKER_03: And then in parallel, um, I've had a computer, I think, since I was like five or six years old.
3:03
SPEAKER_03: So it's just a sort of a natural fit, right?
3:06
SPEAKER_03: And so I I decided I didn't want to go out to the real world after graduating.
3:11
SPEAKER_03: So I decided to do two years of master's of environmental science and ended up getting a degree around air pollution and ended up in a sus in an environmental compliance world, which is now what we consider sustainability.
3:23
SPEAKER_01: Yeah, well, it's interesting.
3:24
SPEAKER_01: Um for our listeners' benefit, we're recording this during climate week.
3:28
SPEAKER_01: And I think I've met everyone in the US who has spent more than 20 years in sustainability because I never really knew that there were any.
3:35
SPEAKER_01: And I met have met several this week.
3:38
SPEAKER_01: So I think Sammy is one of those.
3:40
SPEAKER_01: I count my power and utilities background as being in this space for a while, but it I, you know, we're obviously only uh climate adjacent there.
3:48
SPEAKER_01: So, Sammy, can you just give up some brief um highlights of what types of things you're doing with this background when you're talking to clients?
3:59
SPEAKER_03: Yeah, and happy to.
4:00
SPEAKER_03: I mean, I mean I think the big obviously the big focus right now is really around the regular regulatory aspects, right?
4:06
SPEAKER_03: So you've got CSRD, you know, this week California's made its announcements.
4:11
SPEAKER_03: SEC will drop at some point, which I I won't comment on.
4:15
SPEAKER_03: You've got ISSB, you can pretty much uh stack up three or four letter acronyms and and there's a bunch of regulations.
4:21
SPEAKER_03: So think about now in this now move from a voluntary to a regulated environment, there's there's a lot more uh robustness that needs to be added, right?
4:30
SPEAKER_03: And primarily in two flavors automation, because it has to be done in a shorter period of time, right?
4:34
SPEAKER_03: So whatever our financial close, if you think about it, your 10K, you can't wait six months to do your 10K.
4:40
SPEAKER_03: But that's currently what sustainability reports are 180 days.
4:43
SPEAKER_03: We have clients that are trying to shrink that down to 20 to 10 to even six days in some cases, and that that's gonna require a lot of automation.
4:50
SPEAKER_03: In parallel, think about the controls, right?
4:53
SPEAKER_03: Uh at the end of the day, if this is gonna go through reasonable assurance, a lot of greenhouse gas calculations are done in spreadsheets.
4:59
SPEAKER_03: So that has to evolve.
5:01
SPEAKER_03: And so a fair chunk of my time is spent on how do companies improve their technology, their data architecture to go support all of that automation and assurance that's now required.
5:11
SPEAKER_01: Well, it's interesting you mentioned the 180 days because you also mentioned the California climate rule.
5:16
SPEAKER_01: And one of the provisions in SB 253, which is the rule that requires greenhouse gas reporting, is that you report your scope one and scope two the first year by some deadline that will be determined by the um in 2026, but a date that'll be determined by the California Air Resources Board.
5:33
SPEAKER_01: And then you start with scope three the following years, the following year in 2027 on 2026 data, but it explicitly says, and I found this very interesting, that you're going to have an extra 180 days to report, although they're going to re-examine that.
5:48
SPEAKER_01: So even there, the 180 days pops up, but with a thought that it needs to push up.
5:54
SPEAKER_01: And I think that's what you're seeing because of potentially the SEC rule and otherwise.
6:00
SPEAKER_03: Exactly.
6:00
SPEAKER_03: And when you start to think about all of the different reports that you have out there, right?
6:03
SPEAKER_03: The voluntary ones, so CDP, GRI, SASB, et cetera, now you have regulated ones, they all have to kind of tie up, right?
6:09
SPEAKER_03: You can't report one thing in CDP and something to another.
6:13
SPEAKER_03: That's just not going to stack up.
6:14
SPEAKER_03: So in many ways, companies are having to start to think about what's my reporting across all that.
6:18
SPEAKER_03: And by the way, everything I just described from a technology perspective, that's just in the reporting.
6:23
SPEAKER_03: So very defensive compliance risk mitigation.
6:26
SPEAKER_03: Keep in mind there's a whole world of companies out there that have made commitments, right?
6:29
SPEAKER_03: They're trying to get to net zero, science-based targets, reduce their commitments on plastic or reduce their waste and think about circular economy and water management.
6:38
SPEAKER_03: So those are all action-oriented operationalization of sustainability.
6:42
SPEAKER_03: And then there's a whole, there's sorry, there's a select few of companies that are actually using sustainability to drive growth, right?
6:48
SPEAKER_03: So in a good sense, people who think about the sort of the technology architecture in the right way can actually enable all three of that kind of strategy action and visibility aspect of it.
6:58
SPEAKER_03: And by doing it right the first way, you're just going to spend less money down the road because otherwise you're going to have to put in separate systems and so on and so forth to make it all work.
7:06
SPEAKER_01: Well, and so let's talk about technology specifically.
7:09
SPEAKER_01: And you mentioned spreadsheets, you mentioned controls.
7:12
SPEAKER_01: And the old head of our national office, I still remember one of the first conversations I had with him about sustainability, and he was just beside himself because he, I don't know if it was his client or another client, but they were emailing data around.
7:27
SPEAKER_01: And it was sort of numbers that then someone aggregated into a spreadsheet and then whatever happened from there.
7:33
SPEAKER_01: And I think in the world of SOCS, any financial reporting person would have equal cringe feelings that he had.
7:40
SPEAKER_01: But obviously, in sustainability, as you mentioned, that is maybe a more normal state of play.
7:46
SPEAKER_01: So where what is the current technology landscape?
7:49
SPEAKER_01: How do you think about this?
7:51
SPEAKER_03: Yeah, I mean, I think first and foremost, the the question I always get is you know, what's the right software that I need to go buy, right?
7:58
SPEAKER_01: Yes, I've gotten that question too.
7:59
SPEAKER_01: And I say go talk to Sammy.
8:01
SPEAKER_01: Exactly.
8:01
SPEAKER_03: So my answer is very simple.
8:02
SPEAKER_03: So it's there is no single one solution that does all of ESG.
8:07
SPEAKER_03: By the way, that's not unusual.
8:08
SPEAKER_03: There's no one signal system that does all of finance, right?
8:11
SPEAKER_03: When you think about payroll and accounts payable and ledgers and all that, that there isn't a single.
8:15
SPEAKER_03: So most people are now thinking about sort of this interoperable kind of ecosystem, right?
8:19
SPEAKER_03: What are the right, you know, blocks that I can put together that to assemble in the right way to serve whatever purpose I'm trying to serve.
8:26
SPEAKER_03: So so that that's a huge element of it, is sort of that assembly of of the right, you know, right pieces.
8:32
SPEAKER_03: Um, so I think that's a that's a huge uh uh aspect of it.
8:36
SPEAKER_03: The other the other thing that I think is really kind of resonating with folks is focus on the data, but also focus it on a f phase kind of journey, right?
8:47
SPEAKER_03: If you think about it, like you're not gonna all of a sudden go from zero to hundred overnight.
8:51
SPEAKER_03: Like no one does that.
8:52
SPEAKER_03: So what's what are the pieces you need now?
8:54
SPEAKER_03: What are the pieces you need next year, and what are the pieces you need after that?
8:57
SPEAKER_03: You know, and thinking about them in that very kind of methodical fashion.
9:00
SPEAKER_03: And that way, by doing that, you're gonna one, have a more scalable architecture.
9:06
SPEAKER_03: Two, the regulations are always evolving, so whatever's true today may or not be true tomorrow.
9:11
SPEAKER_03: Um, and then I think to your point around this this coming back to the spreadsheets example, it it was good enough back in the day.
9:18
SPEAKER_03: It really was.
9:18
SPEAKER_03: It was okay.
9:19
SPEAKER_03: Like no one, no one's gonna do reasonable assurance, no, no different than how people are doing financial data now in much more robust systems because of things like Sarbanes Oxley, because of things like reasonable assurance.
9:30
SPEAKER_03: So that same level of industrialization will happen.
9:32
SPEAKER_03: The the big difference is we had 7,000 years to go build a ledger, right?
9:38
SPEAKER_03: We got about three to five, depending on which regulation you look at, maybe even two, depending on which country you're in, right?
9:43
SPEAKER_03: So there's a lot of pressure to get it done, right?
9:46
SPEAKER_03: Now, the good thing is a lot of technology companies have already been thinking about it.
9:50
SPEAKER_03: So that innovation that we have to go do is not as much of a lift as it was when we first got SOX, for example.
9:56
SPEAKER_01: So, Sammy, one question, and I get this feeling of urgency from a lot of clients that we talk to, and urgency from the point of view that there are too many things I'm trying to do at the same time.
10:09
SPEAKER_01: So I'm trying to figure out which of the required reporting is going to uh apply to me.
10:16
SPEAKER_01: What are those requirements?
10:18
SPEAKER_01: What data do I have?
10:19
SPEAKER_01: What am I doing voluntarily?
10:20
SPEAKER_01: What systems do I need?
10:22
SPEAKER_01: And all these moving parts.
10:23
SPEAKER_01: And so, as you are talking to companies that maybe haven't nailed down all of those things, how do you think about sequencing?
10:30
SPEAKER_01: Do you start with technology?
10:32
SPEAKER_01: Do you end with technology?
10:33
SPEAKER_01: Where does it fit in to this broad spectrum, recognizing technology takes time?
10:39
SPEAKER_01: And, you know, they there's not that much time to the point you made.
10:43
SPEAKER_03: Yeah, 100%.
10:44
SPEAKER_03: I mean, I think it's it's thinking about it in that context of people process technology assurance.
10:48
SPEAKER_03: I think the folks that are treating this as a very linear work stream, let's go figure everything out and then we'll go figure out technology, are gonna find themselves rapidly crunched to get the technology implemented.
10:59
SPEAKER_03: Um, to your point, technology takes time.
11:02
SPEAKER_03: Um, it takes investment, it takes resources.
11:05
SPEAKER_03: Um, interesting observation.
11:07
SPEAKER_03: You know, a lot of folks right now are trying to compare what sustainability is doing with controllership.
11:12
SPEAKER_03: A lot of times IT is not even at the table, so they don't even know that this is a requirement.
11:16
SPEAKER_03: Uh, a fair amount of what I'm doing right now is educating CIOs on what does CSRD mean for them?
11:22
SPEAKER_03: And and keep in mind, post-COVID, there's a lot of digital transformation analytics works that those IT organizations are doing regardless of sustainability.
11:32
SPEAKER_03: So they're already busy, they're occupied, they're doing upgrades of their ERPs and so on and so forth.
11:36
SPEAKER_03: So, how do we make sure that they're connected, involved, and and and are there at the right time?
11:42
SPEAKER_03: That the earlier to engage, the better.
11:44
SPEAKER_03: And I think in terms of deploying systems, I think that that'll that'll depend on the maturity and how many gaps you have, but it definitely need to work it in parallel.
11:52
SPEAKER_03: I wouldn't wait till the end.
11:54
SPEAKER_03: You've also got a number of companies that are like, we've got to go figure out the data first.
11:58
SPEAKER_03: Once again, I think you do both in parallel.
12:00
SPEAKER_03: I mean, that's the the power of analytics, um, especially with AI and generative AI, like there's there's so much more capability now in the technology layer to shortcut, to you know, reduce or streamline efforts that you might do manually.
12:15
SPEAKER_03: Um, and also the fact that you have to do this more repeated, right?
12:18
SPEAKER_03: If you do double materiality, it's not just a one-time thing.
12:20
SPEAKER_03: You're gonna have to do it over and over and over requires automation.
12:24
SPEAKER_03: So the more that people start to think about technology now, the better.
12:27
SPEAKER_01: Well, and so you sort of rolled off your tongue this people process technology assurance.
12:32
SPEAKER_01: And that is not in that sequencing, at least, something we've spent too much time on the podcast here talking about and recognizing you are here to talk about technology.
12:42
SPEAKER_01: But when you think about how it fits in with those other pieces, what are some of the keys you see from you know people and process before you're thinking about technology or as part of that conversation?
12:52
SPEAKER_03: Yeah, I I think it's a handshake.
12:54
SPEAKER_03: I mean, when you think about a large organization that has to do regulatory reporting, there's a lot of pieces, right?
13:00
SPEAKER_03: There's a lot of people that's involved, a lot of functional groups.
13:02
SPEAKER_03: I mean, that's CSRD affects everything, right?
13:05
SPEAKER_03: Everything that that that touches a business.
13:07
SPEAKER_03: And so you think about all the people that's involved, right?
13:10
SPEAKER_03: And so there's some handshakes.
13:11
SPEAKER_03: Uh human capital is the best example.
13:13
SPEAKER_03: I have to report human capital metrics, you know, per CSRD, per proposed rules of SEC, per other, for other reasons, but it's also highly private, right?
13:23
SPEAKER_03: You got PII, you got GDPR, so I I can't have the same transparency that I may, for example, have with my financial data or my carbon data because of some of those privacy rules.
13:36
SPEAKER_03: So, what's that handshake?
13:37
SPEAKER_03: How do I make sure that the CFO and the auditors have a level of comfort around the diversity metrics I'm disclosing per regulation, but without overexposing what I have in the human capital side?
13:49
SPEAKER_03: That's that's that gets to be quite tricky.
13:51
SPEAKER_03: Technology actually plays a huge part of it because technology allows us to abstract, allows us to harmonize, it allows us to create consumption layers that gives us the right visibility and the right traceability with the right level of security and privacy.
14:05
SPEAKER_03: That's just a simple example.
14:06
SPEAKER_03: Now, coming back to the process, there's a bit of a handshake.
14:10
SPEAKER_03: Finance has got to get comfortable that they're gonna be able to go back to, let's just say, an HR team and go say, hey, you know, where is this data?
14:17
SPEAKER_03: Can I go do it?
14:18
SPEAKER_03: If I send my auditor to you, will you be able to reproduce this results?
14:22
SPEAKER_03: But coming back to the the sort of the the process side again as well, workers in the value chain, CSRDS metric, right?
14:31
SPEAKER_03: Okay, well, what systems track the value chain workers?
14:35
SPEAKER_03: HR employees, great.
14:37
SPEAKER_03: I got that in my HR systems, right?
14:39
SPEAKER_03: The extended value chain?
14:40
SPEAKER_03: Okay, well, I don't necessarily want to track that because of co-employment laws, because of other reasons around you know liability, et cetera.
14:47
SPEAKER_03: So now where do I go find that data?
14:49
SPEAKER_03: Well, that gets to be quite interesting.
14:51
SPEAKER_03: So it it is a multivariable problem.
14:53
SPEAKER_03: Once again, sorry to throw my engineering hat in here.
14:56
SPEAKER_03: I have to use the word multivariable.
14:57
SPEAKER_03: I'm sure it's somewhere in my engineering degree.
14:59
SPEAKER_03: But at the end of the day, it it's it's making sure you're running all of these things in parallel.
15:06
SPEAKER_03: And if I can say one more plug here from the technology side of things, this is actually where technology actually really helps in the context of the technology, especially the IT folks, are used to running multi-work stream programs.
15:18
SPEAKER_03: So they are quite equipped to run things with PMO, project management offices, and with change management.
15:24
SPEAKER_03: And because this is a transformation, it is affecting all parts of the business.
15:28
SPEAKER_03: And IT has a lot of experience in that space that can actually now benefit sustainability and finance as they look to now drive whatever they're trying to drive within their organizations around the new shape of reporting, whatever that might look like, right?
15:42
SPEAKER_03: Whether it's a combined voluntary regulator role, whether it's a center of excellence, whatever that operating model is, uh IT definitely needs to have a huge, huge seat at the table uh around this.
15:53
SPEAKER_01: All right.
15:54
SPEAKER_01: Well, I'm gonna come back to your multivariable problem so we can test your engineering some more.
15:58
SPEAKER_01: But let me let's get practical here for a minute.
16:01
SPEAKER_01: I'm gonna give you two scenarios.
16:02
SPEAKER_01: So, first scenario, I'm a controller.
16:04
SPEAKER_01: I'm gonna be the controller in both these scenarios.
16:07
SPEAKER_01: And I've been doing voluntary reporting as a company.
16:11
SPEAKER_01: My organization hasn't been that involved, but I know we've got a whole group that's been publishing information for years.
16:18
SPEAKER_01: And so does that give me a high level of comfort, or does that make me say, hey, I better make sure I'm getting involved and also start looking at the technology I'll use that in quotes that they're using for that reporting?
16:32
SPEAKER_03: It's definitely giving controllers some pause.
16:36
SPEAKER_03: I think primarily because a lot of this is raising awareness around the increased governance and controls around what was historically sustainability reporting.
16:46
SPEAKER_03: Once again, if you think about the origination of sustainability reporting, a lot of it was marketing driven, right?
16:50
SPEAKER_03: We're gonna create the pretty graph, gonna create the pretty brochure, lots of cool pictures.
16:54
SPEAKER_03: That was a lot of a dialogue.
16:55
SPEAKER_03: Okay, legal was involved to make sure we didn't say the wrong thing or make the wrong commitment.
16:59
SPEAKER_03: But this is now data that's gonna go into the financial assurance world.
17:03
SPEAKER_03: And there's a whole different world of playing.
17:06
SPEAKER_03: I mean, just thinking about the difference of estimated versus actuals.
17:09
SPEAKER_03: Think about if I now go from 180 days to let's just say less than 20, I don't have the same luxury that I did previously when I could go work my spreadsheet and work it over and over and over.
17:19
SPEAKER_03: Um, so think about then also how is internal audit now thinking about it, do they have the same level of appreciation that this sustainability data they may have done some level of verification on is now the same level of reasonable assurance as financial data.
17:33
SPEAKER_03: So there's there's a bit of awareness building.
17:35
SPEAKER_03: I think where controllers get a level of comfort is when folks on the sustainability side appreciate that there is a change.
17:42
SPEAKER_03: It's not like, oh yeah, however, we've been doing it is all fine.
17:45
SPEAKER_03: But rather there is a change that needs needs to happen and that they're willing to be part of that change.
17:51
SPEAKER_03: Whereas I think where people get a little bit of um, let's just say, concern is when the sustainability team's like, yeah, yeah, we've been doing it for years, we got it covered.
17:59
SPEAKER_03: Okay, not the same thing as doing sustainability report for a marketing brochure as it is for the 10K, right?
18:05
SPEAKER_03: Different levels of magnitude and and and severity around this.
18:08
SPEAKER_03: And in some of these use cases, people just haven't, you know, really thought through what the impact and the implication and the automation it is.
18:16
SPEAKER_01: Yeah, and I mean it's an interesting point uh point you make about the 10K, and even absent a 10K, but if you if you think about the SOX level of certifications and otherwise, and now you're you're going to be report uh producing reporting for regulatory purposes, whether CSRD, California, you know, maybe some other country, your IFRS sustainability disclosure standards.
18:39
SPEAKER_01: And now suddenly you have the CFO and CEO who are putting their names to things, they are also going to have a different expectation.
18:48
SPEAKER_01: And that's where the controller likely really is going to need to make sure they have a seat at the table and they have some oversight over what's going on.
18:56
SPEAKER_03: Absolutely.
18:56
SPEAKER_03: And it's also going to affect how companies think about their sustainability strategy.
19:00
SPEAKER_03: You're they're probably going to be more cautious about what they put in the public domain because now it's going to be cross-checked and verified.
19:06
SPEAKER_03: Um, you listed a whole set of acronyms just as I did earlier.
19:09
SPEAKER_03: And now, now, now think about the practicality.
19:11
SPEAKER_03: I always use estimated versus actual emissions.
19:13
SPEAKER_03: Most people, you know, let's just take something simple like electricity emissions, scope two emissions.
19:17
SPEAKER_03: Oh, well, great.
19:18
SPEAKER_03: I get my bill once a month.
19:19
SPEAKER_03: It usually shows up about, you know, 30 days late.
19:23
SPEAKER_03: Okay, but I've already filed my SEC report using my estimated emissions.
19:27
SPEAKER_03: Well, great.
19:28
SPEAKER_03: For my CDP report, am I using my estimated or do I use my actual, do I, is it material enough where it requires a restatement?
19:35
SPEAKER_03: You know, now if I report a different number to my CDP, is someone to go check that number and come back and say, hey, hang on, Sammy, that that number is different than your SEC.
19:43
SPEAKER_03: And let's not even get into reporting boundaries, like the whole legal entity basis that we have in Europe and how we do reporting the SEC, they're all different, right?
19:52
SPEAKER_03: So now how do you now verify that data, let's just say five years from now, right?
19:57
SPEAKER_03: Because keep in mind all this stuff is changing.
19:59
SPEAKER_03: So how do you keep track of all of these changes, but still provide the right operational data to give to my managers to improve their sustainability performance, right?
20:08
SPEAKER_03: To decarbonize requires me to go to real-time data.
20:12
SPEAKER_03: Uh, I'm sure we'll have a lot of folks that are nervous about reporting real-time data and all the noise that it creates or that it has in the data set as it shows up in a 10K filing.
20:22
SPEAKER_01: Well, and you gave me a little flashback, but maybe not in a good way, when you're talking about uh reporting electricity, because having audited electricity companies and dealing with continuous emissions monitoring, and even those numbers are moving.
20:36
SPEAKER_01: And so if you you just think about this, you're dealing with estimates that maybe get chewed up and maybe in some cases really don't.
20:43
SPEAKER_01: And how does that work?
20:44
SPEAKER_01: There's just a lot of of different pieces to to think about there.
20:48
SPEAKER_03: But funny aside, I I spent a fair amount of my time.
20:51
SPEAKER_03: It was about uh I think literally six months of my life trying to figure out daylight savings as companies were moving to hourly reporting, uh, which especially in the energy world, we've had to do that for a while.
21:01
SPEAKER_00: Like the two hours of the year caused a lot of problems from your reporting perspective, that 23 hours in a day and 25 hours in a day.
21:11
SPEAKER_03: I do have to admit in that case we just kind of gave up and paid somebody an intern to just go fix it once a year.
21:15
SPEAKER_03: It was just easier.
21:16
SPEAKER_03: But hey, I'm pretty sure I can't do that in the socks world.
21:18
SPEAKER_01: So no, I I don't think so.
21:20
SPEAKER_01: So wait, so let me, I'm still the controller.
21:22
SPEAKER_01: Let me do uh actually now I thought of another scenario.
21:24
SPEAKER_01: So we're gonna get two more.
21:25
SPEAKER_01: Okay.
21:26
SPEAKER_01: So my second one, and I'm gonna get to data, but I'm now been given responsibility.
21:33
SPEAKER_01: So my companies looked at it and said, sustainability reporters are doing a good work, but we need to put some level of socks and other controls in place.
21:41
SPEAKER_01: Controllers are responsible.
21:42
SPEAKER_01: But then the controllers thinking, I'm already dealing with all these other transformations, and I put in a new ERP, and I'm trying to digitally transform my function, and I've got budget constraints and people constraints, and everyone's worn out.
21:55
SPEAKER_01: And do we work from home and do we not?
21:57
SPEAKER_01: Like there's all these other competing things.
22:00
SPEAKER_01: Now this is put on top of it.
22:03
SPEAKER_01: As the controller, how do I think about this problem?
22:05
SPEAKER_01: And again, where does kind of technology fit in?
22:08
SPEAKER_03: Yeah, I mean, I think thinking about it in that phased manner, it doesn't have to be perfect on day one.
22:15
SPEAKER_03: And I think a lot of people expect that for some reason.
22:18
SPEAKER_03: And I and that's a fallacy, in my opinion.
22:20
SPEAKER_03: Like this will evolve over time.
22:24
SPEAKER_03: The regulations are still being figured out, auditors are still trying to figure out how that works, companies are still trying to figure out how that all works.
22:30
SPEAKER_03: It'll happen over time.
22:32
SPEAKER_03: I I think you have to balance what you need to do in the sort of kind of crawl, walk, run kind of phase, right?
22:38
SPEAKER_03: It's okay if not everything is perfect the first year around, even you know, so that's that's perfectly fine.
22:44
SPEAKER_03: I think the second thing is really putting that out all on a roadmap.
22:48
SPEAKER_03: Um, I know it's a very it's a very consulting thing to say, but at the end of the day, having that roadmap will help you prioritize the right things and align it with other initiatives.
22:59
SPEAKER_03: You know, a lot I use something as simple as scope three, and I appreciate that.
23:02
SPEAKER_00: That is not simple, Sammy.
23:04
SPEAKER_03: Uh actually, it's one of the few areas where I say scope three is fun uh and tax is fun.
23:09
SPEAKER_00: Um I know I'm I'm making faces in Sammy just for the audience's benefit.
23:14
SPEAKER_03: You know, and I'll and I'll use I I'll use my best example.
23:17
SPEAKER_03: So if you think about your 1098 form that everybody gets in January, right?
23:20
SPEAKER_03: You get box 1A and you get your 1098 from whatever brokerage or whatever company that gets getting, you don't doubt that number, right?
23:28
SPEAKER_03: You look at that box 1A and you go, okay, that number's good.
23:31
SPEAKER_03: Like I'm not gonna go there and go ahead and go report it.
23:33
SPEAKER_03: Yeah, or you're gonna report it to the IRS, right?
23:35
SPEAKER_03: But think about the ecosystem, think about the transparency that's been involved in doing that.
23:40
SPEAKER_03: Okay, so so I want you to keep that mindset in in mind as a controller.
23:44
SPEAKER_03: That didn't get built overnight, you know?
23:47
SPEAKER_03: That happened over years.
23:48
SPEAKER_03: Um, equally, I think where it comes back to the technology side is thinking through what are other initiatives that are going on.
23:55
SPEAKER_03: So coming back to my scope three example.
23:57
SPEAKER_03: Well, I need to put in the architecture to allow me to calculate scope three emissions.
24:02
SPEAKER_03: Great.
24:03
SPEAKER_03: It's also the same reporting architecture that I need to help incentivize and create a responsible supply chain, a responsible sourcing program.
24:11
SPEAKER_03: Well, that's a different value proposition.
24:14
SPEAKER_03: Now, equally, if I can really figure out my suppliers and really optimize what I'm doing, I can actually be more attractive to my customers who may have set a science-based target.
24:24
SPEAKER_03: So now all of a sudden I'm putting using the same investment, I'm using the same data technology architecture to now fund three or four initiatives.
24:33
SPEAKER_03: So by putting that on a roadmap, it's just easier to see.
24:35
SPEAKER_03: It's a, it's like, you know, a big game of Tetris, right?
24:38
SPEAKER_03: I can sequence things in the right way, put the right priorities on the areas that I need to, but also gives me a bit of a view of where I'm getting, where I have gaps.
24:46
SPEAKER_03: The other thing I will also say from a technology perspective, everybody thinks we have to go buy new stuff.
24:51
SPEAKER_03: Don't need to buy new stuff.
24:52
SPEAKER_03: There's 600 solutions in the market at a minimum that go do ESG solutions.
24:57
SPEAKER_03: I'm sure any company that I work with has at least, you know, a half a dozen of them for sure, right?
25:02
SPEAKER_03: They're already using them for um SEC reporting.
25:06
SPEAKER_03: They might be using them for carbon, they might be using them for customer relationship management, they might be using them in their ERP space.
25:12
SPEAKER_03: All of those different solutions I just mentioned and I described have an EST solution.
25:16
SPEAKER_03: So how can I better leverage those investments?
25:19
SPEAKER_03: What's what I'm seeing is an interesting transformation now, and it's actually been driven by the IT organization rather than finance or by um by sustainability.
25:28
SPEAKER_03: Imagine we're doing an ERP upgrade.
25:31
SPEAKER_03: The IT guys are already starting to ask now, wait, hang on.
25:33
SPEAKER_03: I've heard about this, you know, carbon ledger, sustainability ledger.
25:37
SPEAKER_03: What do I need to start putting in now, Sammy, that I can that I can leverage that will help my sustainability colleagues when they come knocking at my door six months from now?
25:45
SPEAKER_03: You know, and so you're seeing this kind of interest that is coming from the IT organs because if we're gonna go put in an ERP, it's easier to put it in now than to rip it out, you know, six months from now and then have to go fix it and pay, you know.
25:59
SPEAKER_03: Uh uh I'm a big fan of uh, you know, I I assemble a lot of like kind of Lego models, right?
26:04
SPEAKER_03: Yeah, and so my entire my entire talk track is based on Lego, and I haven't told you built a Lego Lamborghini, like it's it really is bad when I have to go back to page four because I missed a part and then have to fix it on page 170.
26:18
SPEAKER_03: It just is not a good feeling.
26:20
SPEAKER_03: So that right sequencing with that roadmap view, engaging the IT and technology colleagues.
26:26
SPEAKER_03: Sorry, one of the last plug, once again from technology.
26:28
SPEAKER_03: I don't think people have appreciated how much capability, especially in the world like generative AI and analytics, can provide.
26:35
SPEAKER_03: I mean, just the sheer visibility I can use with analytics to go expose, for example, my value chain.
26:40
SPEAKER_03: I I have analytic capabilities right now that allows me to go expose what I can go find from tier one to tier end suppliers.
26:47
SPEAKER_03: I can do that in a fairly automated fashion.
26:49
SPEAKER_03: Imagine me being able to leverage that for double materiality analysis or for scope three emissions.
26:55
SPEAKER_03: Gives me a lot more power and capability to go do that in a more automated fashion than you know, paying somebody to go do that manually.
27:02
SPEAKER_01: Well, but you raised a good point there.
27:04
SPEAKER_01: You mentioned earlier supply chain and HR data.
27:06
SPEAKER_01: Now you mentioned value chain, and I had jotted down a question on this because so you're saying I can use this technology to go look and do analysis of my value chain.
27:19
SPEAKER_01: But to do that, don't you need to know your value chain?
27:24
SPEAKER_01: And so then if I think of your Lego example, my son is into Legos, you know, you can't start in book five, right?
27:30
SPEAKER_01: You know, you start in book one, and hopefully that's the easier part.
27:33
SPEAKER_01: It gets harder and harder.
27:34
SPEAKER_01: But don't you need to do that value chain?
27:37
SPEAKER_01: What is my value chain before you can start analyzing it?
27:41
SPEAKER_01: Or is it iterative?
27:42
SPEAKER_03: It's iterative, it's iterative.
27:43
SPEAKER_03: And once again, if you think about like that Lego example, you have to build a good foundation for sure, right?
27:48
SPEAKER_03: So, you know, what is a good reporting foundation?
27:50
SPEAKER_03: You need to have a solid data platform, need to have a good, you know, transactional system to do things like carbon accounting, you need a good ledger to keep track of the data because of all this restatement stuff, and then you need a good disclosure system, right?
28:02
SPEAKER_03: Or a reporting analytics solution.
28:03
SPEAKER_03: So those are kind of the four big blocks that I need.
28:06
SPEAKER_03: Okay, so then if I then take a step back and I start to go look at how do I then go fit that into that sort of sequence and how do I make it iterative?
28:15
SPEAKER_03: It doesn't have to be perfect day one.
28:17
SPEAKER_03: So what's what's the core foundation?
28:18
SPEAKER_03: So what are the foundational Lego pieces I need to put in to make sure I've got the right, let's call it found well, foundation to go build on.
28:27
SPEAKER_03: But then I can build a modular, right?
28:29
SPEAKER_03: Whenever you think about building a big Lego model, you know, you you build one piece over there and you build one piece over there, and as long as you put the right connections, you can then assemble them, hopefully.
28:38
SPEAKER_04: Hopefully.
28:39
SPEAKER_03: Although I will fully admit there will be times where you do forget a piece or it fell on the off the counter or and or but then that's at least you're like 95% of the right.
28:49
SPEAKER_03: Yeah.
28:50
SPEAKER_03: And then if you think about sort of the wider digital transformation we spoke of like IT organizations are doing, that's where it gets really exciting because they're already going to spend money doing this.
28:59
SPEAKER_03: How can how can I tap into that investment?
29:02
SPEAKER_03: Right?
29:03
SPEAKER_03: Because keep in mind there's a financial aspect to this as well, right?
29:05
SPEAKER_03: Controllers and sustainability folks are running around going, oh my God, we got a new regulation, I've got to go find budget.
29:11
SPEAKER_03: Okay, if we're already leveraging and spending lots of money on digital transformations, which are not cheap by, you know, unfortunately, but how can I leverage that investment to help me put in the right things that I need to go put in?
29:24
SPEAKER_01: So if I think of your idea of the foundation then, and we've talked about a lot of different parties here controller, sustainability, you know, the um information technology, all these people, legal.
29:36
SPEAKER_01: Who is normally the one who's deciding the foundational pieces?
29:41
SPEAKER_01: And I'm guessing you're gonna say it's cross-functional, but someone's driving that.
29:45
SPEAKER_01: So how do we think about that?
29:47
SPEAKER_03: I I think it depends on the organization.
29:48
SPEAKER_03: It it okay, so it definitely is cross-functional.
29:51
SPEAKER_03: Uh the three big parties I always see is someone in finance, so CAO, controller, somebody in sustainability, because they own the data.
29:58
SPEAKER_03: Right.
29:58
SPEAKER_03: And you need somebody in IT.
29:59
SPEAKER_03: If you if you're missing at least one of, and then someone usually from legal, but uh just just to be clear around that one.
30:05
SPEAKER_03: If you're missing one of those four at your at your table, that's a problem, right?
30:10
SPEAKER_03: Now, some organizations decide that they're gonna use have the sustainability drive it, but more and more because of the financial regulations, you're seeing control are driving more of the agenda.
30:21
SPEAKER_03: But equally, like when it comes to like technology architecture, like that's where the CIO is gonna come in and say, here's my strategic landscape.
30:29
SPEAKER_03: Here's where I'm trying to drive the IT capability of the organization.
30:33
SPEAKER_03: We don't want the CFO to go pick a random solution.
30:36
SPEAKER_03: As much as I know CFOs, I want to be closet architects, the IT function has a great capability around that to figure out the right capability that can be enabled in the existing strategic landscape as they evolve.
30:49
SPEAKER_03: And then what are the additional pieces that I need to buy to kind of complement what I may or may not already have?
30:55
SPEAKER_01: Yeah, so it's an interesting point because one of the things we're talking about from a reporting perspective is how your reporting fits in with your corporate strategy.
31:04
SPEAKER_01: So you want this reporting to reflect what's your important values as a company and meeting your stakeholder needs and obviously meeting all the requirements.
31:11
SPEAKER_01: But your point is you actually also have internal strategy that you need to consider.
31:16
SPEAKER_01: In this case, your IT strategy, and you know, there's perhaps other.
31:20
SPEAKER_01: So making sure you have the right people at the table will be important to make sure you're not sort of going in a zigzag type of direction.
31:28
SPEAKER_03: 100%.
31:28
SPEAKER_03: And then also think about the broader use case.
31:31
SPEAKER_03: I'll use tax once again as my example.
31:33
SPEAKER_03: I mean, think about now, you know, CBAN, the core, the carbon tax in Europe.
31:37
SPEAKER_03: Think about, you know, low-carbon fuels, for example, here in the US.
31:41
SPEAKER_03: There's a and the IRA and the infrastructure, but uh so there's a bunch of tax implications now.
31:46
SPEAKER_03: So how do my tax folks know what I reported from a carbon perspective so they can accurately calculate it, right?
31:52
SPEAKER_03: The last thing you want is, you know, somebody to ship a product or claim a subsidy and then find out, oh, wait, I missed something and then becomes a tax file, you know, right.
32:00
SPEAKER_01: Or you didn't claim a subsidy that you were at.
32:03
SPEAKER_03: 100% available to you.
32:05
SPEAKER_01: 100%.
32:06
SPEAKER_03: And so thinking about all those use cases, I think is actually very, very critical to make sure that that one, you put the right architecture, and then bottom line, put it at the right level of investment.
32:18
SPEAKER_03: You don't want to overinvest, but you also don't want to underinvest as well.
32:21
SPEAKER_03: And and what's going to come back to change management.
32:24
SPEAKER_03: It is a transformation.
32:26
SPEAKER_03: Organizations are changing.
32:28
SPEAKER_03: You're going from a group over there that used to do voluntary reporting around sustainability, and another group over there used to do financial and maybe some sustainability, mashing those two together, putting more IT architecture.
32:38
SPEAKER_03: If that's not the definition of transformation, I don't know what it is.
32:42
SPEAKER_03: And change management, program management has to be core to that.
32:45
SPEAKER_03: And I think once again, that's where companies under underestimate the effort.
32:49
SPEAKER_01: Right.
32:50
SPEAKER_01: So then, if again, I'm the controller, another scenario would be commitments and how commitments the company is making fit in.
32:58
SPEAKER_01: And you gave an example earlier that at one time a lot of this was more viewed as marketing.
33:03
SPEAKER_01: And we even hear sometimes as an argument for the accounting for carbon credits that, oh, that's just marketing.
33:09
SPEAKER_01: And I'm we'll tell our listeners right now that is not the counting for carbon credits.
33:15
SPEAKER_01: But it's taking a more strategic view of these commitments, moving beyond marketing to the fact they're including all these regulatory filings and otherwise, how do you see those fitting in to what a company needs?
33:27
SPEAKER_01: Because this now isn't just reporting what happened, but it's also saying if I made a commitment that I'm going to do something by 2030, how do I know that I'm going to get there?
33:37
SPEAKER_03: Yeah.
33:38
SPEAKER_03: Well, let's let's start with why a company is making those commitments in the first place.
33:42
SPEAKER_03: They're they're doing it because they're, you know, trying to appeal in whatever definition of appeal is, uh, in terms of their customers, their investors, a set of stakeholders, even their own employees, right?
33:52
SPEAKER_03: Like that's what's driving them.
33:53
SPEAKER_03: So ultimately, you're gonna want to back that up.
33:56
SPEAKER_03: There's enough, let's call it, distrust in the system right now that unless you have verifiable data that I can point to and you know, claims of greenwashing, et cetera, that people want to go see.
34:06
SPEAKER_03: So that's that's what's driving those commitments.
34:08
SPEAKER_03: So I need to make sure I have the right backing, either to avoid lawsuits or somebody calling greenwashing on me to be able to go do that right now.
34:17
SPEAKER_03: Not all commitments are built equally, right?
34:19
SPEAKER_03: What I'm disclosing to the SEC may or may not be what you know, what a country manager disclosed as part of a you know new facility build, for example.
34:28
SPEAKER_03: So recognizing that not all metrics are equivalent, and so thinking through that.
34:33
SPEAKER_03: Um, but also then what's the governance process so that people aren't out there making outlandish claims?
34:40
SPEAKER_03: And what's the IT architecture that enables that so people can quickly find what they're doing, how are they doing, how are they measuring its performance?
34:48
SPEAKER_03: Because the one thing you can guarantee is that there's gonna be somebody on social media who thinks they have better data than you are, because they went and did a bunch of analytics and you know had a 16-year-old godson that went and you know had a had a high school project that apparently now involves data science and came back and said, My answer is this, and now you got to go fix it, right?
35:06
SPEAKER_03: So you'd rather not be on the defensive around that.
35:09
SPEAKER_03: So putting in the right technology and the right architecture, the right support and analytics around data to give you confidence that whatever commitments you're making, or somebody that could claim that about you is is gonna be critical for that.
35:23
SPEAKER_01: So if I go back to your multivariable problem uh phrase, and you can tell me if this is the right definition of a multivariable problem, but if I'm again their controller and I need to do GHG reporting for purposes of CSRG, which has one set of organizational boundaries, now I need to bring it in and I'm going to report for California, and California says follow the GHG protocol.
35:48
SPEAKER_01: And then let's say SEC adopts its rules the way they were proposed, and now I have even a different set of organizational boundaries.
35:55
SPEAKER_01: And for purposes of this particular problem, let's assume there's no equivalence.
35:59
SPEAKER_01: So I have to do all of those.
36:01
SPEAKER_01: And I may be dealing with people that some of them don't understand GHD reporting, some of them don't understand uh financial reporting.
36:12
SPEAKER_01: And so you have different people with different sets of information and all of this information to report.
36:17
SPEAKER_01: How does technology solve this problem?
36:20
SPEAKER_03: Well, very, very fundamentally put, it allows you at least capture all that information for sure, organize it in a way so that you know exactly what you reported to California or to ISSB or to SEC, et cetera, et cetera, right?
36:33
SPEAKER_03: So helping to organize that, helping to also match the data, right?
36:37
SPEAKER_03: If you think about, oh, I got a report against XYZ legal entities in Europe, well, great, where do I go find that list?
36:44
SPEAKER_03: Um, and then the most important piece to where I think technology really helps is keep in mind, I could have an auditor come back to me like a few years later and say, Sammy, how did you generate that report?
36:54
SPEAKER_03: Prove it to me.
36:56
SPEAKER_03: And can you imagine if you did this manually on spreadsheets, the sheer effort it would take to go do that and to be able to recreate it and the public embarrassment or reputational risk you would have by not being able to do that, or potentially even fines, depending on what it is.
37:11
SPEAKER_03: But now imagine how technology can not only store, aggregate, harmonize, and archive or store, you know, uh lock down that data to be able to enable both you disclosing that publicly, but also enable an auditor to come in and say, Yep, I I see where I see how you got your data.
37:30
SPEAKER_03: You know?
37:30
SPEAKER_03: Um, I I think one other thing too is is technology allows you to evolve, right?
37:35
SPEAKER_03: People are constantly evolving, their calculations are getting better data.
37:38
SPEAKER_03: We're moving from monthly invoices to real-time IoT data because I have you know all kinds of cool thermostats in my building.
37:46
SPEAKER_03: And bottom line, by the way, people are doing that.
37:48
SPEAKER_03: Not they're doing it for a sustainability reason, but let's let's face it, the best way to reduce my scope two emissions, reduce my energy.
37:54
SPEAKER_01: Yes.
37:55
SPEAKER_03: Best thing that does is reduce my energy bill.
37:57
SPEAKER_03: Like I will literally pay less money.
37:58
SPEAKER_03: And now, by the way, I got a scope two benefit.
38:01
SPEAKER_03: Well, great.
38:01
SPEAKER_03: So so because of that, I got I now have value that I'm creating, i.e., reduce ops in that case, that can now point to pointing to that architecture where that allows me to then sort of return my investment on having more robustness, having more control, and feeling more confident around what am I measuring, what am I improving, and what am I disclosing?
38:22
SPEAKER_03: The other thing I'm gonna say is the companies are already starting to think about this is actually using that as competitive advantage to their customers, right?
38:30
SPEAKER_03: As you imagine PwC and our supply chain as a science-based target, as you imagine companies having to interact with their customers, it's competitive advanced because probably you're you're gonna deal with a customer that has a sustainability commitment.
38:44
SPEAKER_03: So your ability to not only track what you're measuring and what your goals are, but now what are my commitments of what are my customers' commitments and what are my customers' goals and how I can help them?
38:54
SPEAKER_03: Ooh, that gets to be real strategic.
38:56
SPEAKER_03: And that could change the game of your relationship with your customers or your stakeholders.
39:01
SPEAKER_03: And it's just a different way of integrating and demand, the demand for sustainable products in whatever shape or form that looks like is changing.
39:09
SPEAKER_03: It's evolving.
39:10
SPEAKER_03: Um, you see that in the goods that you buy in the store, you see that in the services that companies are providing.
39:15
SPEAKER_03: All of that, once again, is underpinned by data.
39:18
SPEAKER_03: And the company that can provide that data in a in a more interoperable, transparent, in a seamless way is is is gonna have a better chance of taking advantage of that.
39:30
SPEAKER_01: So you've mentioned this idea of data evolution, systems evolution a few times.
39:36
SPEAKER_01: And you know, you just sort of have to start, right?
39:39
SPEAKER_01: And for most companies, they at least have a year, maybe two years before they really have to start reporting this data for regulatory purposes.
39:49
SPEAKER_01: But I still think there's like a level of squeamishness around, oh, I'm gonna start, but it's not perfect on day one.
39:56
SPEAKER_01: And as accountants, you know, we like our I's dotted, T's crossed.
39:59
SPEAKER_01: I think uh engineers are likely the same a bridge is gonna fall down if you made a mistake in your equation.
40:06
SPEAKER_01: So, how do you balance this level of I have to start somewhere with I don't want to report if it's not perfect?
40:15
SPEAKER_03: Uh I think there is a level of iteration, right?
40:18
SPEAKER_03: We can't just hide our head in the sand and say, oh, problem will go away.
40:21
SPEAKER_03: You do have to start somewhere.
40:23
SPEAKER_03: I think the nature of resources and budgets and all that means like you're not gonna be able to do all of it, you know, in a big, massive, you know, project, but rather taking it one piece at a time.
40:36
SPEAKER_03: Let's start out with basics.
40:37
SPEAKER_03: Like, do you know what you have to report?
40:39
SPEAKER_03: Do you know what technology you have?
40:41
SPEAKER_03: Do you know what gaps you have to fill in the reporting architecture?
40:44
SPEAKER_03: Those four components I laid out.
40:46
SPEAKER_03: Do you have all four of those components?
40:47
SPEAKER_03: Well, okay, that's just that by itself is a good starting point.
40:51
SPEAKER_03: I think the second thing is just starting to work through what are the no regret things, right?
40:54
SPEAKER_03: What are things I can definitely take out of spreadsheets and go put them in a in a more robust system, which I may already own, and that by itself is a huge leap forward.
41:03
SPEAKER_03: How can I aggregate all this data?
41:05
SPEAKER_03: Because one of the biggest things that you've noticed is a lot of people just collect all their ESG data in a spreadsheet somewhere, and that's their reporting.
41:12
SPEAKER_03: Okay, there are systems out there that are better designed for collecting all that ESG data.
41:16
SPEAKER_03: So there's some basic no regret moves that I think do two things for you.
41:21
SPEAKER_03: One, start to put the foundations of that, that, you know, start to put the initial building blocks of that foundation.
41:26
SPEAKER_03: And I think second, give confidence that you actually know where the problems are.
41:31
SPEAKER_03: And once again, you don't have to solve it.
41:33
SPEAKER_03: No one's expecting everyone to go to real-time IoT data across all of the electricity of all of my stores overnight.
41:40
SPEAKER_03: That's unrealistic.
41:41
SPEAKER_03: It's expensive, and I wouldn't recommend it.
41:43
SPEAKER_03: But hey, I don't want to be in a position a year from now where if one of my stores wants to do it or a country wants to do it to help meet their decarbonization commitment, that I don't have to rip out everything and replace it.
41:55
SPEAKER_01: Right.
41:55
SPEAKER_01: So flexibility then is going to be key.
41:57
SPEAKER_01: But it also seems like you're saying you have to have some aspect of anticipating directionally where things are going.
42:05
SPEAKER_01: And with things moving so quickly, again, I think that's a balancing question, right?
42:09
SPEAKER_01: Of how do you meet what you think you need when six months from now that number that's like a moving target.
42:15
SPEAKER_03: Yeah.
42:16
SPEAKER_03: I mean, you're definitely building for flexibility, scalability, um, and guarantee that it'll all change in six months from now.
42:23
SPEAKER_03: So just accept that.
42:24
SPEAKER_03: Um I I think the the big thing in terms of balancing, I think two things.
42:27
SPEAKER_03: So one is taking a very pragmatic approach around it.
42:30
SPEAKER_03: Don't have to build it all at once, build in that sort of iterative way.
42:33
SPEAKER_03: I I think the second thing is also you don't have to do it by yourself, right?
42:37
SPEAKER_03: I mean, that's where there is an ecosystem of companies, technology companies, consulting organizations, strategy partners, other competitors, other peers, customers, suppliers, et cetera, that are going through the same challenge, for lack of a better word.
42:52
SPEAKER_03: And I think being able to provide share and and uh convene thoughts also I think helps because I think you'll you'll be able to crowdsource different ideas.
43:02
SPEAKER_03: Um, once again, if you go back to my engineering, uh my engineering roots, we don't build a perfect plan on day one.
43:09
SPEAKER_03: Like that doesn't ever happen.
43:11
SPEAKER_03: You build a plan, you look at it, you get some feedback, you get some inputs, you look at it, you stare at it, you mark some things out, you redline it, and then you fix it again.
43:18
SPEAKER_03: I'm assuming the same is true in the auditing world.
43:21
SPEAKER_03: Why would this be any different?
43:23
SPEAKER_01: Well, and I think you raise a good point about all the parties that you can turn to, but in particular, thinking about industry and industry groups, because you're likely dealing with similar issues, and because potentially you'll develop some conventions within your industry of emissions factors that you're all using or otherwise, working in some of those types of collectives really does have to help in addressing some of these issues.
43:48
SPEAKER_03: Absolutely.
43:48
SPEAKER_03: And then when you kind of boil it down to basics of well, let's just say with greenhouse gas as a good example.
43:54
SPEAKER_03: You know, electricity is electricity and how it runs a building, whether you're a chemical company or a retailer.
44:00
SPEAKER_03: Store or bank, it still works the same way.
44:02
SPEAKER_00: That's the beauty of a the beauty of climate science.
44:06
SPEAKER_03: It all there's only there's only so many ways you can make carbon.
44:09
SPEAKER_00: Yeah.
44:10
SPEAKER_03: And there's only so many ways you can quantify them, as much as like people like to invent their own methods.
44:15
SPEAKER_03: Uh, but at the end of the day, it's there's a limited number of ways to do it.
44:19
SPEAKER_03: And so therefore, there is actually more commonality than people like to think across the industry, definitely within the sector, absolutely sure.
44:29
SPEAKER_03: Even across the industry, once again, I use my electricity example.
44:33
SPEAKER_03: By the way, same is true in waste, same is true in water, same as true in diversity.
44:37
SPEAKER_03: Is there really a sector-specific uh nuance in terms of what I throw out in the, you know, in my trash can every day?
44:45
SPEAKER_01: Maybe not.
44:45
SPEAKER_03: Maybe not.
44:46
SPEAKER_01: Yeah.
44:46
SPEAKER_01: No, I think that's an excellent point.
44:48
SPEAKER_01: So maybe two final questions uh for you.
44:51
SPEAKER_01: First one would be then, you know, as you're meeting with someone for the first time who's maybe relatively newer to this and they sort of have that where should I start?
45:00
SPEAKER_01: And we we talked about this early on, but I wanted to revisit it because again, if I'm listening and thinking, okay, I want to do something tomorrow to move along this problem.
45:12
SPEAKER_01: What are, you know, a handful of first steps that people could take?
45:16
SPEAKER_01: Recognizing a handful of first is, you know, those are not the same thing.
45:20
SPEAKER_03: But everything's priority number one is what is what my boss always says.
45:23
SPEAKER_03: Exactly.
45:24
SPEAKER_01: Well, and I mean, to be fair, that you can't for everyone, you wouldn't have the same first step.
45:28
SPEAKER_01: But what are a couple that are common that you would recommend?
45:32
SPEAKER_03: I think I would say there's three things that every company should do.
45:35
SPEAKER_03: So, first of all, get that cross-functional team.
45:37
SPEAKER_03: I know it sounds silly.
45:38
SPEAKER_01: Well, no, it's important.
45:39
SPEAKER_01: It's very important.
45:40
SPEAKER_01: Yeah.
45:41
SPEAKER_03: Um, you know, once again, sort of in a in some panel discussions, it's amazing how much IT actually literally gets left off the table.
45:47
SPEAKER_03: They just, oh, it's an afterthought.
45:49
SPEAKER_03: Oh, yeah, let's get them involved.
45:50
SPEAKER_03: They need to understand CSRD, they need to understand the implications.
45:53
SPEAKER_03: So get that cross-functional team working because it's going to take time to iron that out.
45:57
SPEAKER_03: Like people aren't going to understand new roles and responsibilities, and that takes time to socialize and and settle.
46:03
SPEAKER_03: So get that cross-functional team.
46:06
SPEAKER_03: I I think number two, start the process around understanding where you currently are.
46:11
SPEAKER_03: It's okay if it's not perfect.
46:13
SPEAKER_03: I'll be I I'll be highly surprised if anyone, you know, comes out of that exercise and goes, Yep, got it all sorted, no problems.
46:20
SPEAKER_03: Even companies have been spending tens of millions of dollars every year around the space, they still have their challenges.
46:26
SPEAKER_03: So it doesn't hurt to go figure out where you are.
46:30
SPEAKER_03: And that's gonna do a couple things.
46:31
SPEAKER_03: It's gonna help inform where your gaps are, and you can use your business processes to prioritize, and it's gonna help you give you a better feeling for the level of investment it's gonna take to fix that so you can start to socialize that.
46:43
SPEAKER_03: So I think that's number two.
46:45
SPEAKER_03: Uh I think the third thing is start to think about it's not just reporting.
46:49
SPEAKER_03: So, how do I use this data not only for reporting, but for some of these other value-added exercises?
46:56
SPEAKER_03: Because that's gonna change the ROI, right?
46:59
SPEAKER_03: Very simply put.
47:00
SPEAKER_03: If I'm just using this for reporting, great, it's a check-in-the-box.
47:03
SPEAKER_03: The board's gonna be like, say, why are you spending all this money on a check-in-a-box compliance exercise, right?
47:08
SPEAKER_03: First of all, they're gonna ask me what do I have to do it?
47:10
SPEAKER_04: Yeah.
47:10
SPEAKER_03: Um, what happens if I don't?
47:12
SPEAKER_03: And then the second question is gonna be like, how, how, how much, how little can I spend to go get that done, right?
47:17
SPEAKER_03: Okay, great, but it's different if I'm now using this for competitive advantage.
47:21
SPEAKER_03: That's a whole different ball of you know, uh, new budgets, new capabilities, new opportunities.
47:27
SPEAKER_03: And by the way, same data.
47:29
SPEAKER_03: Uh might be positioned slightly different, might be organized slightly differently, but it's still fundamentally the same data around, let's just say carbon, for example.
47:37
SPEAKER_03: So I think thinking through those other use cases above and beyond reporting will help.
47:42
SPEAKER_03: Uh, those three things, I think if people do that, that's great.
47:45
SPEAKER_03: What's rapidly after that, go figure out where do you want to be your target state architecture.
47:49
SPEAKER_03: Right.
47:49
SPEAKER_03: Right?
47:50
SPEAKER_03: And then accept the fact that it won't be perfect.
47:53
SPEAKER_03: Somewhere there needs to be a punch list that you work through, and some things will get dropped off the list.
47:57
SPEAKER_03: There'll be a big gap list, and and that's okay.
48:00
SPEAKER_03: Everybody has one.
48:01
SPEAKER_03: You know, it's okay.
48:03
SPEAKER_03: No one will be perfect in this exercise.
48:05
SPEAKER_03: And I think that that level of comfort and knowing that no one's perfect is actually, I think, quite comforting.
48:11
SPEAKER_03: Coming back to what you asked me originally.
48:12
SPEAKER_03: Like, what's my first qu my first comment or my first conversation is actually that it's okay that you won't have perfect reporting architecture.
48:21
SPEAKER_03: The world won't end.
48:22
SPEAKER_01: Yeah, although I'll share with the audience every time Sammy says that I have like a visceral reaction because I think, again, coming from financial reporting and auditing, you do have expectations.
48:33
SPEAKER_01: And I will say that as you're doing regulatory reporting, you still want your information to be materially correct, but you have time to work to that.
48:43
SPEAKER_01: Start working now, though.
48:44
SPEAKER_01: So on that point of start working now, I asked you where companies should start.
48:49
SPEAKER_01: Let's flip the coin.
48:50
SPEAKER_01: And I think you were actually starting to go here.
48:53
SPEAKER_01: Now I'm talking to a best in class company.
48:57
SPEAKER_01: What are they doing that other companies should be thinking about or aspiring to?
49:02
SPEAKER_03: So I think I think probably most importantly, they they are putting in the tools and the systems and the architecture to really operationalize sustainability.
49:14
SPEAKER_03: So reporting, yes, we'll take care of it, but there is a driver around improving the performance of that.
49:21
SPEAKER_03: That also now means my endpoints are different.
49:23
SPEAKER_03: I might take my sustainability data and feed it to customer-facing systems.
49:28
SPEAKER_03: I travel a fair amount.
49:29
SPEAKER_03: I'd love to see my sustainability impact at a personal level in the hotels and the flights that I take in the app that I book, because it makes a difference to me from a personal level.
49:38
SPEAKER_03: So imagine that kind of experiential.
49:41
SPEAKER_03: How can I now communicate?
49:43
SPEAKER_03: Same thing with the products that you buy, right?
49:45
SPEAKER_03: Um, I I use an example earlier today, you know, as I buy the, you know, I as I get my coffee from the from the machine.
49:52
SPEAKER_03: Well, how do I know what the sustainability impact is?
49:55
SPEAKER_03: Because I might pick a different coffee.
49:57
SPEAKER_03: Um so start to think about those.
49:59
SPEAKER_03: So that's best in class is really those organizations that are thinking about how sustainability is going to drive top line growth, right?
50:06
SPEAKER_03: Bottom line companies are in it for a reason.
50:08
SPEAKER_03: Now, don't get me wrong, I truly believe in the societal impact, but sustainability doesn't mean bad business.
50:15
SPEAKER_03: Sustainable businesses tend to last longer.
50:17
SPEAKER_03: That's the fundamental definition of sustainability, right?
50:21
SPEAKER_03: That being said, the ones that are thinking about these other use cases and really starting to think about how they can optimize and monetize, and the compliance aspect is sort of a natural pull through, is I think where best-in-class companies are.
50:36
SPEAKER_03: And therefore, they're orienting what they're spending in terms of analytics, in terms of customer-facing systems, in terms of transparency, in terms of engagement with their suppliers.
50:47
SPEAKER_03: Because at the end of the day, the more that my customers and my suppliers get better, in addition to myself, the more I'm going to be valuable to a company.
50:55
SPEAKER_03: And also, by the way, messaging, how do I now communicate that to the world?
51:00
SPEAKER_01: All right.
51:01
SPEAKER_01: Well, that is a good message to end on.
51:03
SPEAKER_01: So, Sammy, such a pleasure to talk to you and looking forward to continuing this conversation on a future podcast.
51:08
SPEAKER_01: So, thank you.
51:09
SPEAKER_03: My pleasure.
51:10
SPEAKER_03: Thank you for having me.
51:11
SPEAKER_01: That's our show for today.
51:13
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51:19
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51:33
SPEAKER_01: From Thought Leadership at PwC, I'm Heather Horn.
51:37
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51:48
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