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Talking ESG: Revisiting ESG to enhance value and drive growth · PwC's accounting podcast

• 0:00
  SPEAKER_01: Thought Leadership from PwC's National Office.
• 0:06
  SPEAKER_02: When you publish a report, whether it's to a regulator or you know your publicly available CSR report, you are effectively passing the value of that data to another stakeholder for another purpose.
• 0:19
  SPEAKER_02: And it may be used in all kinds of different ways, like ESG data aggregators, for example.
• 0:24
  SPEAKER_02: There is value in that data.
• 0:26
  SPEAKER_02: Look at the data in the context of your business.
• 0:30
  SPEAKER_02: Bring it back in.
• 0:31
  SPEAKER_02: Unpack it.
• 0:32
  SPEAKER_02: And again, find those stories and then tell the story with the data that you need in order to drive action.
• 0:38
  SPEAKER_00: Hello.
• 0:39
  SPEAKER_00: Today we're back talking ESG, continuing our series of episodes we recorded during New York City Climate Week at the end of September.
• 0:48
  SPEAKER_00: For today's episode, I'm excited to be joined by a special guest, the author of ESG Mindset, Business Resilience and Sustainable Growth.
• 0:58
  SPEAKER_00: This is PWC's Accounting Podcast.
• 1:05
  SPEAKER_00: I'm Heather Horn, and thanks so much for joining us today.
• 1:08
  SPEAKER_00: For today's conversation, I'm happy to be joined by Matthew Siegel, sustainability black belt, a Microsoft's cross-industry team, and as I previously mentioned, the author of ESG Mindset.
• 1:20
  SPEAKER_00: Whether you're a corporate leader, an ESG pro, responsible for sustainability reporting, or just curious about how businesses can make a real impact in the long term, this episode is full of valuable insights you won't want to miss.
• 1:34
  SPEAKER_00: With that, here's my conversation with Matt.
• 1:37
  SPEAKER_00: So, Matt, thank you so much for joining us here on the podcast.
• 1:40
  SPEAKER_00: So happy to have you on and definitely happy to meet with you since you're here in New York for Climate Week.
• 1:45
  SPEAKER_00: And especially excited to talk to you about your book, uh ESG Mindset.
• 1:50
  SPEAKER_00: But before we get into that and your very popular newsletter, I think it'd be helpful for our listeners to understand a bit about your background and then we can dive into things.
• 1:59
  SPEAKER_02: Oh, sure.
• 1:59
  SPEAKER_02: Yeah.
• 1:59
  SPEAKER_02: I have a pretty diverse background that is not sustainability related.
• 2:03
  SPEAKER_02: So I came up in IT for about 15 years, left IT, went into a partner, a Microsoft partner supporting things like Office 365.
• 2:14
  SPEAKER_02: And then I jumped over to Microsoft.
• 2:16
  SPEAKER_02: Um, where I came into Microsoft in financial services about 2018.
• 2:22
  SPEAKER_02: And I was quickly aligned with some of the world's largest asset managers, the world's largest ESG data aggregators.
• 2:29
  SPEAKER_02: And it struck me that I had had a pretty long career and had never heard of ESG.
• 2:35
  SPEAKER_02: And so I started exploring what it meant, what how it evolved from financial services.
• 2:41
  SPEAKER_02: And really what struck me most was that corporates were kind of missing it, and I was personally missing it.
• 2:46
  SPEAKER_02: And when the opportunity came to join a Microsoft team focused on sustainability, which is very much on the commercial side, I jumped at the chance and I've been there ever since.
• 2:55
  SPEAKER_00: All right.
• 2:56
  SPEAKER_00: So then it's interesting.
• 2:57
  SPEAKER_00: Uh how did you get into this idea of writing a book then?
• 3:02
  SPEAKER_02: So taking the learnings from how corporates weren't getting it, I started writing a newsletter, which you mentioned in the summer of 2022.
• 3:12
  SPEAKER_02: And I was an English major and I was writing about 2,500 words a week.
• 3:18
  SPEAKER_02: And I had a friend who was an author, and I asked her, how long is a chapter?
• 3:22
  SPEAKER_02: Because I feel like I'm writing about a half a chapter a week.
• 3:25
  SPEAKER_02: And it turned out it was about a half a chapter a week.
• 3:28
  SPEAKER_02: So I connected with her book publisher and I said, Hey, I think there's something that corporates need to know about ESG that they're just not getting from the markets, they're not getting from governments.
• 3:37
  SPEAKER_02: You know, I think this is a differentiated value proposition.
• 3:40
  SPEAKER_02: What do you think?
• 3:40
  SPEAKER_02: And they jumped at the chance.
• 3:42
  SPEAKER_00: And what exactly would you say is sort of your key message then that is what they weren't getting from the markets and government and otherwise?
• 3:51
  SPEAKER_02: Yeah, there's a lot of confusion out there.
• 3:53
  SPEAKER_02: ESG is very much a blanket term that covers a whole area of ESG issues.
• 4:00
  SPEAKER_02: And what I saw was companies were really struggling to put together a cohesive story for themselves at the center of their business.
• 4:07
  SPEAKER_02: I saw a lot of philanthropy, which is great.
• 4:10
  SPEAKER_02: I saw some material attention to issues, and then I saw a lot of net zero goals and things like that.
• 4:16
  SPEAKER_02: And not quite all of that is ESG.
• 4:19
  SPEAKER_02: It does fall under, you know, the ESG umbrella largely, but I really wanted to impress upon companies that there are material, environmental, social, and governance issues that impact the company and that you have to start from the business in order to address those issues as only you can.
• 4:34
  SPEAKER_02: And that's really the key message of the book.
• 4:36
  SPEAKER_00: And do you feel like, as you've talked to people who have read the book and otherwise, that there you've been able to get some traction with that idea?
• 4:44
  SPEAKER_02: Yeah, but it's it is very, it's very challenging because there are a lot of long sustainability goals at companies, long-standing sustainability goals at companies that I think we're kind of starting to see a pullback of, or not a pullback, a reassessment of some of those goals.
• 5:02
  SPEAKER_02: Because the reality is they didn't consider the business at the time.
• 5:05
  SPEAKER_02: They didn't consider new technologies like AI maybe disrupting where they were going.
• 5:10
  SPEAKER_02: And so they're kind of looking at these goals and restating them in the context of the business.
• 5:15
  SPEAKER_02: So I'm I'm having optimistic conversations that companies are getting at, and I'm really hopeful.
• 5:21
  SPEAKER_00: Yeah, it's interesting.
• 5:22
  SPEAKER_00: And you know, it's interesting this idea of defining ESG.
• 5:26
  SPEAKER_00: We in my job, one of the roles I have is helping respond to SEC proposals.
• 5:32
  SPEAKER_00: And the SEC had a proposal a few years now, ago now, talking about asset managers and investment funds and when they should be labeled ESG, can be labeled ESG, et cetera.
• 5:44
  SPEAKER_00: And one of the things that was so striking about the proposal, and you're nodding, is it they didn't define ESG.
• 5:51
  SPEAKER_00: So how can you have a rule about ESG if you don't even define ESG?
• 5:56
  SPEAKER_00: So as you think about it then, and you're talking to people about explaining the sort of basic understanding.
• 6:02
  SPEAKER_00: Obviously, here in New York Climate Week, I feel like there's so much energy, and it's all the people who are very, very focused in this area.
• 6:10
  SPEAKER_00: But as you go out and speak more broadly, there's a whole combination of people who are focused, but are viewing it as compliance.
• 6:18
  SPEAKER_00: You have the people who are skeptics of like this is a waste of time, and you know, the whole gamut in between.
• 6:24
  SPEAKER_00: And so as you are thinking about those different audiences and talking to them, what are how how do you frame your messaging then?
• 6:32
  SPEAKER_02: Yeah, that's a really great question.
• 6:34
  SPEAKER_02: And it it kind of reminds me of how I opened the book, which is I tell people right up front, this book will not save the world because ESG necessarily it kind of is a path to get there, but it is not directly going after these systemic issues that we have either across the E, the S, or the G.
• 6:52
  SPEAKER_02: And when I say things like, it's the impact of the world on your company, what I actually write in the book is I I realized maybe about three-quarters of the way through, I was even using the word effect and impact interchangeably.
• 7:06
  SPEAKER_02: So I said, it's the effect of the world and its people on your company versus the impact that you can make out.
• 7:13
  SPEAKER_02: And what I try to argue is you can't come at these things from outside your business.
• 7:19
  SPEAKER_02: If you do, if you go after systemic issues, it is very difficult.
• 7:23
  SPEAKER_02: And as soon as a downturn happens or there's some sort of disruption or crisis that you have to deal with, those projects are really shelved because they're not material to your business.
• 7:34
  SPEAKER_02: And once I start really impressing that upon them, I do see like that realization wash over their face that, oh, this isn't this isn't about saving the world.
• 7:45
  SPEAKER_02: I want to still do that, but boy, if I don't save my company, I'm not gonna be around to save the world.
• 7:51
  SPEAKER_00: Yeah, it's a really interesting point because we had a conference yesterday at POBC and the IFRS Foundation talking about the ISSB standards and sort of the state of sustainability reporting.
• 8:01
  SPEAKER_00: And Emmanuel Faber was on our first panel and really focused in on that this is all about risk and opportunity, identifying risk, identifying opportunity.
• 8:13
  SPEAKER_00: And then, you know, we've heard this week from investors is this idea, well, if you have a 25-year time horizon, but the company's not going to be there in 10 years, there's no investment to have.
• 8:22
  SPEAKER_00: And so it sounds like then what you are uh including and discussing is this focus on managing risk, making sure you do still have a company in 10 years.
• 8:33
  SPEAKER_02: That's exactly right.
• 8:34
  SPEAKER_02: And one of the most simple examples that I can call out is that a lot of the regulations, including ISSB, I think the S2, and one of the California bills calls out is climate risk.
• 8:45
  SPEAKER_02: What is the climate risk on your physical assets?
• 8:48
  SPEAKER_02: But yet when I talk to companies, they're all telling me, how do I decarbonize?
• 8:53
  SPEAKER_02: Which granted, you need to do that in order to make sure that you're not playing catch up at the end and have a costly decarbonization effort.
• 9:00
  SPEAKER_02: But boy, if you aren't making sure that you understand where your physical assets sit and if it's flooding, wildfires, hurricanes, earthquakes, whatever it is, invasive species, whatever it is, you're sure going to be in trouble.
• 9:13
  SPEAKER_02: And I'll take it a step further.
• 9:15
  SPEAKER_02: I often hear from agriculture companies that they're pressuring farmers to give them their carbon metrics because they want to report their scope three.
• 9:23
  SPEAKER_02: So I'll say to them, have you talked to your farmers about what they're planning, how the land is changing, what the water's like?
• 9:29
  SPEAKER_02: Because if you're not doing that, all that decarbonization isn't going to be.
• 9:33
  SPEAKER_00: It doesn't really matter.
• 9:34
  SPEAKER_00: And so, do you how does this resonate with people then?
• 9:37
  SPEAKER_02: It seems to resonate, but they still go back and try to decarbonization.
• 9:42
  SPEAKER_02: And it's still very much focused on the reporting.
• 9:44
  SPEAKER_00: Yeah.
• 9:44
  SPEAKER_00: And I it's also interesting a conversation I had this week, and it's another podcast that our listeners may hear.
• 9:50
  SPEAKER_00: I asked, so what do you think the role of reporting is?
• 9:54
  SPEAKER_00: And the response was, well, it doesn't really have a role because it's actually at the end, you know, a business imperative.
• 10:00
  SPEAKER_00: I was thinking, okay, my whole podcast is about reporting.
• 10:03
  SPEAKER_00: But I mean, it to some extent, you're right, because you're not going to solve the problems with reporting.
• 10:08
  SPEAKER_02: Right.
• 10:09
  SPEAKER_02: And I I do very much share that opinion.
• 10:12
  SPEAKER_02: However, I do also love this podcast, and it has been extremely educational in my own because I don't I don't really specialize in the reporting, and I need to find a way to kind of ramp up because it is something that companies have to deal with.
• 10:25
  SPEAKER_02: And honestly, especially in the EU, there are financial fines.
• 10:28
  SPEAKER_02: We've seen, you know, pressure on board members being pr in prison potentially.
• 10:32
  SPEAKER_02: So there are real world consequences there.
• 10:35
  SPEAKER_02: Whether or not it is a vehicle to actually activate change, though, I think has yet to be seen.
• 10:40
  SPEAKER_00: Yeah, and I think this is where we've even done some surveys of companies preparing for CSRD and otherwise.
• 10:46
  SPEAKER_00: And really, I think the integration of risk management, sustainability, and then the reporting as an outcome of that, that is where you see an impact or effect.
• 10:58
  SPEAKER_00: Maybe I have to make sure I'm using those words properly.
• 11:01
  SPEAKER_00: We had the same issue in our sustainability reporting guide.
• 11:05
  SPEAKER_00: But either way, if you uh are just focused on reporting for the sake of reporting, you're not going to get anywhere.
• 11:11
  SPEAKER_00: But if you're not giving transparency to what you're doing, then your investors and the market and otherwise don't have the visibility they need.
• 11:20
  SPEAKER_00: So you need reporting, but it's not the be-all end-all of what it shouldn't be the be-all end-all of the company's sustainability efforts.
• 11:28
  SPEAKER_02: You're totally spot on.
• 11:30
  SPEAKER_02: And now you have me thinking about another comparable standard or regulation that often comes up in this space, which is GDPR.
• 11:37
  SPEAKER_02: GDPR went into effect, and you know, we all kind of joke about the amount of notifications we get about cookies.
• 11:44
  SPEAKER_02: Did it actually drive digital privacy, though, is a different question.
• 11:47
  SPEAKER_02: And that's still even 10 years now, it's it's a hard question to ask.
• 11:52
  SPEAKER_00: Yeah, I'm tempted to ask your point of view.
• 11:56
  SPEAKER_02: I'd I'd I'd wager it probably hasn't, um, just because we still have cybersecurity issues where you know personal data clearly wasn't protected in the way that it meant was meant to drive.
• 12:07
  SPEAKER_02: And I think it's mostly because a lot of companies view it as that reporting exercise.
• 12:12
  SPEAKER_02: And without in kind of internalizing some of these regulations and recognizing what they're trying to drive, it it does.
• 12:20
  SPEAKER_02: It just becomes a compliance exercise.
• 12:22
  SPEAKER_00: Yeah, and I think that's the same risk we have with sustainability reporting.
• 12:26
  SPEAKER_00: So let me quote something from your book because I think it's related here and I think it's helpful.
• 12:30
  SPEAKER_00: And this is talking about this idea that you also can't really risk diluting the relevance of ESG.
• 12:36
  SPEAKER_00: And again, I think sometimes an overfocus on reporting.
• 12:39
  SPEAKER_00: So what you say in the book is if you're going to do it, make it business-like, make it real, and make it matter.
• 12:44
  SPEAKER_00: So, can you talk a little more?
• 12:46
  SPEAKER_00: We can leave reporting aside for a moment about what leaders can do to meet this mandate that you lay out here.
• 12:53
  SPEAKER_02: Yeah, I think it really starts with the basics.
• 12:56
  SPEAKER_02: And um, so I am a giant CSR report nerd.
• 12:59
  SPEAKER_02: I will read CSR reports in ESG reports or whatever reports.
• 13:03
  SPEAKER_00: Yeah, whatever there.
• 13:04
  SPEAKER_00: Soon to be CSRD reports, CSRS reports, yeah.
• 13:07
  SPEAKER_02: I will read them.
• 13:08
  SPEAKER_02: And the very first thing I look for, there's two things I look for.
• 13:11
  SPEAKER_02: One, did they publish a materiality matrix?
• 13:13
  SPEAKER_02: And two, did they publish their stakeholders in a significant way?
• 13:16
  SPEAKER_02: Because there are many sustainability reports that do not publish stakeholders in a material way.
• 13:22
  SPEAKER_02: And that to me gives me all the information I need to know about what's in the rest of the report.
• 13:27
  SPEAKER_02: Whether or not I will find philanthropy, whether or not I will find net zero goals, whether or not I will find actual things they are doing to impact their business and be responsible.
• 13:35
  SPEAKER_02: And I think a lot of companies are kind of missing that.
• 13:38
  SPEAKER_02: And now what I'm worried about is with double materiality and CSRD, you know, I haven't yet seen, you know, people are still working on double materiality assessments.
• 13:47
  SPEAKER_02: I kind of haven't seen those creep into reports yet, but I'm really curious if that's going to be the wake-up call that companies get.
• 13:53
  SPEAKER_02: Because otherwise, they would have to have done it themselves.
• 13:56
  SPEAKER_02: Somebody would have had to have told them do a materiality assessment, find the most material issues and start there.
• 14:03
  SPEAKER_02: I'm curious to see whether or not a double materiality assessment really shifts the mindsets of these companies.
• 14:09
  SPEAKER_02: And if you had to speculate, I oh boy, that's a tough one.
• 14:14
  SPEAKER_02: I would say I think it will shift their mindsets, but I think it's still not going to clear the air on what issues they should focus on.
• 14:20
  SPEAKER_02: And mostly it's because it's a double materiality assessment.
• 14:23
  SPEAKER_02: So now they'll have the same kind of net zero focus that they had because of the impact side.
• 14:29
  SPEAKER_02: And then on the other side, yes, they might surface some business issues.
• 14:33
  SPEAKER_02: What's more, what's more interesting though, I think, is that in this recent round of green hushing in the US and with the IRA and the uh bipartisan infrastructure law, bizarrely companies are starting to get it right.
• 14:45
  SPEAKER_02: And I don't know how that's happening.
• 14:47
  SPEAKER_02: Um, but when I talk to companies, there are many that are like, you know what, we don't really talk publicly anymore about what we're doing.
• 14:53
  SPEAKER_02: We publish our reports, but wow, we are we have just solved this one major material issue.
• 14:58
  SPEAKER_02: And it's just, it's incredible when those things happen.
• 15:01
  SPEAKER_00: Yeah.
• 15:01
  SPEAKER_00: And would you attribute that?
• 15:03
  SPEAKER_00: I want to come back to materiality, but I want to pull this thread a little bit.
• 15:06
  SPEAKER_00: Would you attribute it then to this government funding and otherwise that it gave maybe people the space to actually solve the problem or to focus on an area where maybe they wouldn't have otherwise because day to day they're running too fast at other profits or otherwise?
• 15:21
  SPEAKER_02: You know what?
• 15:22
  SPEAKER_02: I think there's a couple of things.
• 15:24
  SPEAKER_02: One, I think the SEC pause and also kind of that in that green hushing, there is a silence that has caused a reflection on a lot of companies.
• 15:33
  SPEAKER_02: And I talk to Chief Sustainability Officer all the time, and they are very much still under the reporting pressures globally.
• 15:40
  SPEAKER_02: But I feel like some have kind of pulled back, reassessed, and then reframed the challenge to their board as this is material to the business.
• 15:49
  SPEAKER_02: And this is why we have to do it.
• 15:50
  SPEAKER_02: And let's not chase everything, let's carve off the top three things and go after them.
• 15:55
  SPEAKER_00: It's interesting.
• 15:56
  SPEAKER_00: So the question I wanted to ask about materiality is a debate or discussion we've been having in the context of CSRD reporting, but actually also applies to ISSB or otherwise, is this idea of you know what is material, what is relevant.
• 16:12
  SPEAKER_00: And, you know, if a company has an employee picnic and they want to prominently feature this employee picnic in 10 pages of their sustainability report, but in the meantime, child labor and everything else is being buried on you know the back pages, okay, then you're obscuring material information.
• 16:32
  SPEAKER_00: But you know, if they mention the employee picnic in one sentence about their employees, then then maybe it's fine.
• 16:38
  SPEAKER_00: So I also think there's a challenge in reporting of also just balance and making sure you are emphasizing the right things.
• 16:46
  SPEAKER_00: And but it it's it's challenging to think through.
• 16:49
  SPEAKER_02: It it absolutely is because just in thinking through your example, materiality is very subjective.
• 16:55
  SPEAKER_02: And I could take the example of an employee picnic and say, well, maybe it's because maybe it's to celebrate the founder or something, or maybe it's to celebrate a new product launch.
• 17:03
  SPEAKER_02: And bringing that group together is one of the things that on their annual employee survey, they really value.
• 17:09
  SPEAKER_02: So it goes into talent attraction, talent retention.
• 17:12
  SPEAKER_02: But otherwise, it's just an event and maybe that's all it was.
• 17:17
  SPEAKER_02: But to think about your most material issues, I think for an investor or another interested stakeholder, maybe not necessarily a consumer, but maybe.
• 17:28
  SPEAKER_02: Um, I think there are real material issues that they are looking for companies to address, especially like a great example is plastics packaging.
• 17:35
  SPEAKER_02: Like there's so much of it.
• 17:37
  SPEAKER_02: And every time it drives me crazy every time I buy something, and I'm like, oh my gosh, this is in a box that's wrapped in plastic.
• 17:45
  SPEAKER_02: Yes, and the thing is in plastic, and then there's a plastic mold of the thing.
• 17:48
  SPEAKER_02: I'm like, what is happening here?
• 17:50
  SPEAKER_02: Yes, yes.
• 17:51
  SPEAKER_02: I would have been glad for a sandwich bag and a cardboard box.
• 17:54
  SPEAKER_00: Like exactly.
• 17:55
  SPEAKER_00: Yes.
• 17:56
  SPEAKER_00: And well, and I think, I mean, we've also been spending a lot of time on microplastics.
• 18:00
  SPEAKER_00: And I have to say, there's the place I'm in our New York office.
• 18:04
  SPEAKER_00: We're in our New York office, and the place I often go for lunch, they automatically put your food in a plastic bag.
• 18:09
  SPEAKER_00: So I had the plastic bag.
• 18:10
  SPEAKER_00: We had just been talking about microplastics, and like, I'm not throwing this out.
• 18:13
  SPEAKER_00: So the next day I went to lunch there and I tried to hand them the bag.
• 18:17
  SPEAKER_00: And it was like chaos ensued because their whole process was to bag the food as they went.
• 18:23
  SPEAKER_00: And I mean, I understand from their point of view.
• 18:25
  SPEAKER_00: But on the other hand, if I eat there for five days, I don't need, you know, five new plastic bags.
• 18:29
  SPEAKER_00: So I just think it is this is a totally aside, but it's just from behavior or otherwise, people really have to rethink the way things are being done, whether that's packaging, individual consumer behavior or otherwise.
• 18:41
  SPEAKER_00: And I'm not sure there's always there's sometimes a disconnect between what might be right, what people want to do, what the company realistically can do, and even the transition time that's needed to do it.
• 18:53
  SPEAKER_02: That's exactly right.
• 18:54
  SPEAKER_02: And I think it's it's so subjective.
• 18:57
  SPEAKER_02: And I think companies really need to take a leap in some ways.
• 19:01
  SPEAKER_02: You're you might not get your most material issues right away.
• 19:06
  SPEAKER_02: But as you start exploring what ESNG means to your specific business, and it's not going to be the same, potentially even in your same peer group, um, what I think you'll find is that only you can tackle those issues in that way.
• 19:21
  SPEAKER_02: And you may uncover other issues that are kind of related.
• 19:25
  SPEAKER_02: And then you like one of the things I write about in the book is some of these, sometimes there are inner relationships between these material issues as well.
• 19:33
  SPEAKER_02: Like we just talked about you're a stakeholder, stakeholder management, and plastic, right?
• 19:38
  SPEAKER_02: Like these issues also relate to each other in really interesting ways.
• 19:42
  SPEAKER_02: And so, as but you got to spend the time thinking about them.
• 19:45
  SPEAKER_02: And the other thing I think companies over pivot on a little bit is they're too eager to really transition quickly.
• 19:53
  SPEAKER_02: This isn't a this isn't a sprint, this is a marathon.
• 19:56
  SPEAKER_02: Like take your time, do your research, don't let it get in the way of progress, but then plan out progress steadily.
• 20:04
  SPEAKER_02: And you I think you'll get to the end state you want.
• 20:06
  SPEAKER_00: Yeah, and I guess it's interesting because I think part of the challenge here is that you can't make everyone happy.
• 20:13
  SPEAKER_00: So yes, I mean, in anything in life, but but in particular maybe in this case.
• 20:19
  SPEAKER_00: And so then I think you have this balance of, and you know, we're sitting here in the US, a lot of people thinking it's going way too far.
• 20:27
  SPEAKER_00: And then you have, you know, other people, other countries, other stakeholders, this we're not going nearly far enough.
• 20:33
  SPEAKER_00: And that's on a macro scale, but even within a company, someone in the company may think the company's efforts are going way too far, and someone else says no, you know, it's not far enough, et cetera.
• 20:42
  SPEAKER_00: And so how does how do you, I know you talked about this, think about these challenges and helping a company strike the right balance?
• 20:50
  SPEAKER_02: Yeah.
• 20:51
  SPEAKER_02: What I write about in the book is getting to those material issues, I think, really helps build defensibility because you can make the argument that you're dealing with an issue that matters to the business, you're approaching it from the business.
• 21:05
  SPEAKER_02: There may or may not be a financial, I mean, businesses do all kinds of things that are not financial that benefit them, but there could be a financial bottom line or there could be some sort of intangible benefit.
• 21:16
  SPEAKER_02: And lots of company value sits in intangibles now.
• 21:19
  SPEAKER_02: So the defensibility is really what you're after.
• 21:22
  SPEAKER_02: Now, one other thing that I think helps that is being consistent in your message.
• 21:26
  SPEAKER_02: And right now, what I think we're seeing in this restatement of goals from a lot of companies is that there's a lot of unsettled feelings from employees and other folks because they thought that they were either working or engaging with a brand that was doing something that aligned with their values.
• 21:42
  SPEAKER_02: When it turns out that they had to take a more pragmatic approach.
• 21:46
  SPEAKER_02: A great example of this is what we're seeing in the auto industry now with EVs.
• 21:50
  SPEAKER_02: Like they are pragmatically looking at the low adoption of EVs for all kinds of perfectly reasonable consumer reasons.
• 21:58
  SPEAKER_02: And like I would love an EV, but I just Can't where I live right now.
• 22:01
  SPEAKER_02: Yeah.
• 22:02
  SPEAKER_02: And they're favoring hybrids.
• 22:04
  SPEAKER_02: And that kind of makes sense to me.
• 22:06
  SPEAKER_02: But if you're an employee at one of those companies, you might be struggling because you might be thinking, oh my gosh, I thought it was working at the car of the future place.
• 22:13
  SPEAKER_02: And that's just not how business is.
• 22:16
  SPEAKER_02: And if you if they don't make that pivot, they're not going to be able to survive to finally get to the place that we want them to.
• 22:22
  SPEAKER_00: Yeah.
• 22:23
  SPEAKER_00: And I think this idea of moving how fast companies should be moving is a struggle in a lot of different ways.
• 22:29
  SPEAKER_00: I mean, you know, we saw when uh the EU taxonomy came out and gas generation was still labeled green, even though it's creating emissions was a huge uproar.
• 22:40
  SPEAKER_00: But on the other hand, if you want to go from coal to renewables just like that, I mean, the that takes a lot of time.
• 22:47
  SPEAKER_00: It takes a lot of time to build power plants for one thing.
• 22:49
  SPEAKER_00: And then we saw the, you know, the uh with the war in Ukraine and everything else, the disruption.
• 22:55
  SPEAKER_00: And so I think there's a level of realism that people need to have too.
• 22:59
  SPEAKER_00: It's not to say don't make progress, but you have to take it in steps.
• 23:04
  SPEAKER_02: I think that's very true.
• 23:06
  SPEAKER_02: That that's a great insight.
• 23:07
  SPEAKER_02: And that would maybe be the one takeaway if there's nothing else from this that you take away.
• 23:12
  SPEAKER_02: Just you have to recognize that this we can't shut off fossil fuels, for example.
• 23:17
  SPEAKER_02: If we do that, it will plunge the global south into absolute chaos.
• 23:21
  SPEAKER_02: Now, is there a path to do that?
• 23:23
  SPEAKER_02: Sure.
• 23:23
  SPEAKER_02: Are we doing it?
• 23:24
  SPEAKER_02: And probably not.
• 23:26
  SPEAKER_02: But be realistic about those goals.
• 23:29
  SPEAKER_00: Yeah, I think again, it's interesting.
• 23:31
  SPEAKER_00: And power for regular listeners know it's something I'm very interested in because it came from the power and utilities industry.
• 23:36
  SPEAKER_00: But one of my early audit clients in the 90s, so dating myself here, was a renewable facility.
• 23:42
  SPEAKER_00: And they had these special types of power contracts where basically they're being paid way above market value for power because it was to incentivized development of wind.
• 23:51
  SPEAKER_00: In this case, it was wind.
• 23:52
  SPEAKER_00: And I mean, they were making a fortune from these power contracts.
• 23:55
  SPEAKER_00: But actually, the company itself was not making a fortune because uh it was expensive to generate wind power then.
• 24:02
  SPEAKER_00: They were just getting way above market price.
• 24:04
  SPEAKER_00: Now you turn around and look, and there's times of day that power is free because there's so much of it.
• 24:09
  SPEAKER_00: And you so you really do see the impact of that investment that was made then, but also that was 30 years ago.
• 24:15
  SPEAKER_00: So I think we need to recognize if we make investment now in your plastic example, you know, for example, there can be time that's needed before we're gonna suddenly have alternative packaging or otherwise.
• 24:27
  SPEAKER_00: Right.
• 24:28
  SPEAKER_00: So you said earlier you read so many CSR and other reports, and you talked about a couple of things you look for when you you look at them.
• 24:37
  SPEAKER_00: But I guess if you're talking to the reporters in the audience, what are just a couple things that stand out to you?
• 24:43
  SPEAKER_00: As you can use your English uh mind, and what but what stands out to you for a well-done report that really to you does convey the story of that company?
• 24:53
  SPEAKER_02: Yeah, I think starting again, starting at the materiality matrix and stakeholders and centering your report around those is the key.
• 25:02
  SPEAKER_02: And when I say centering the report, that's really what I mean.
• 25:05
  SPEAKER_02: Like you can certainly storytell around the philanthropic stuff, some of the some of the employee engagement stuff, like we talked about, but if you have to really center not only your CSR report, but your goals.
• 25:16
  SPEAKER_02: And in and we're starting to see that in some of these restatements of net zero goals.
• 25:21
  SPEAKER_02: You're starting to see some goals actually become material goals because companies realize that that is a focus area.
• 25:28
  SPEAKER_02: So start with that materiality and stakeholder and build your report around it.
• 25:31
  SPEAKER_02: Make sure your CEO statement recognizes that this is a business imperative and that these are your most material topics.
• 25:39
  SPEAKER_02: Make sure that your efforts are well documented.
• 25:41
  SPEAKER_02: But that also means that you actually have to be doing those efforts, right?
• 25:44
  SPEAKER_02: So make sure that you're engaging in the proper way.
• 25:47
  SPEAKER_02: And I like reports that are well organized.
• 25:50
  SPEAKER_02: Like, you know, I see reports, reports used to be broken out by ES and G, or they would sometimes add a fourth pillar.
• 25:56
  SPEAKER_02: Um, I kind of like it that way.
• 25:58
  SPEAKER_02: But honestly, like if you just communicate your most material issues in an effective manner from those two points, I think it's a super powerful tool for stakeholders.
• 26:07
  SPEAKER_02: Now, will a consumer look at that?
• 26:09
  SPEAKER_02: No.
• 26:09
  SPEAKER_02: But will an investor look at that?
• 26:11
  SPEAKER_02: Absolutely.
• 26:11
  SPEAKER_02: And does it show them that you have a good control of your business?
• 26:15
  SPEAKER_02: Oh my gosh, all day long.
• 26:16
  SPEAKER_00: So as you're talking then to different people and you're talking about your book, I know one of the things that is uh you also talk about is the importance of having accurate and reliable information.
• 26:29
  SPEAKER_00: And again, we're talking about reporting here, although also the business perspective.
• 26:34
  SPEAKER_00: And so, you know, as you think about where to make investments, obviously you come from a technology company.
• 26:41
  SPEAKER_00: How do you think about data and the role of data in both the business side of things and the reporting side?
• 26:47
  SPEAKER_02: Yeah, I think accuracy is really important.
• 26:49
  SPEAKER_02: There is a diminishing set of returns on getting totally accurate data, which which all companies are currently struggling with.
• 26:56
  SPEAKER_02: Where do you set the boundaries on where you're collecting data?
• 27:00
  SPEAKER_02: But I think ultimately we need to collect data in order to understand our businesses better.
• 27:07
  SPEAKER_02: So, what I'm seeing and hearing from a lot of sustainability officers is that when they're in the process of collecting data and calculating it into something like a carbon emissions number, it doesn't give them enough information to act on it.
• 27:20
  SPEAKER_02: Totally gives them enough information to report on it.
• 27:22
  SPEAKER_02: But what they end up with is this giant aggregated number for a facility or the company or a business unit.
• 27:29
  SPEAKER_02: And it's not granular enough or matched up with the other data points that they need in order to act on it.
• 27:35
  SPEAKER_02: And so one of the trends that we're seeing now coming from a technology company is that they're trying, sustainability in ESG data is almost becoming a forcing function to have that tough conversation about hey, I don't make sustainability another data silo.
• 27:50
  SPEAKER_02: And oh, by the way, what other data silos do you have?
• 27:53
  SPEAKER_02: Because you kind of have to democratize this data, and you probably should be democratizing some other data securely across your environment.
• 28:00
  SPEAKER_02: And once you do that, you can build dashboards, have AI models, do a predictive analysis, do what-if analysis, maybe even pull in some generative AI through qualitative assessment.
• 28:12
  SPEAKER_02: Because not every, you know, a lot of this, as you know, is not quantitative data.
• 28:16
  SPEAKER_02: It's storytelling, what are your peers doing, things like that.
• 28:20
  SPEAKER_02: So getting that data in order, getting it democratized, and then doing that hard work on the back end is really where I think things kind of need to go.
• 28:28
  SPEAKER_02: It's a mixed bag right now because reporting definitely is the tip of the spear at the moment.
• 28:32
  SPEAKER_00: Yeah, and I guess I know in your book you say that technology is the fourth pillar in ESG reporting.
• 28:37
  SPEAKER_00: And I do think I loved that when I saw it because I think it is incredibly important.
• 28:43
  SPEAKER_00: Because again, without data, as at least a starting point, then it is hard to make decisions and otherwise.
• 28:51
  SPEAKER_00: But on the other hand, when you talk about democratizing data and the fact companies have challenges with other data, not just this type of data.
• 29:00
  SPEAKER_00: How do you tackle those types of issues?
• 29:03
  SPEAKER_02: Oh my gosh.
• 29:04
  SPEAKER_02: So yeah, this is a giant can of worms.
• 29:06
  SPEAKER_02: So let's let's go back just a little bit.
• 29:08
  SPEAKER_02: Um, ESG was coined in 2004, which was about three or four years before the iPhone.
• 29:13
  SPEAKER_02: And I was in IT at the time.
• 29:15
  SPEAKER_02: So technology very much has underpinned, but really accelerated after the iPhone was launched in business.
• 29:23
  SPEAKER_02: Had it been, had ESG been coined just a few years later, I'm convinced technology would have been hanging off the end because it has those same risks and opportunities that the ESG pillars have.
• 29:34
  SPEAKER_02: Now, to your point, it can also be a powerful tool because it underpins the business to not only assess it from a data perspective, but also solve the challenges.
• 29:45
  SPEAKER_02: And we're seeing this just with the increase in AI lately, especially not so much generative AI, but things like high performance compute, quantum computing, and the application of material science.
• 29:56
  SPEAKER_02: But that is one way where we can help find new sustainable materials that we need to replace some unsustainable components like lithium, for example, in solid-state batteries.
• 30:07
  SPEAKER_02: Now, another application of technology to solve those problems is really easy.
• 30:12
  SPEAKER_02: And it's it's also intersectional with cost, which is efficiencies, putting up sensors, trying to track what factory floor equipment is doing, trying to track for leaks in infrastructure, maybe from a government, you know, a government perspective.
• 30:25
  SPEAKER_02: Those types of things are a really great example of the application of technology that doesn't necessarily have to do with that data and reporting work stream to solve some of these problems.
• 30:34
  SPEAKER_00: Yeah, although it's interesting if I step back and again, I think you gave this example of, you know, you're dealing with this number, maybe that's aggregated for the entire company, and now I have to try to figure out what to do with it.
• 30:46
  SPEAKER_00: And then again, I think there's this time element of how do you figure out which data you should be tracking or how to tease out this data in order to know where to focus.
• 30:59
  SPEAKER_00: So it's great you have sensors and maybe you identify methane leaks or something else.
• 31:03
  SPEAKER_00: Okay, that's fine.
• 31:04
  SPEAKER_00: But where do you start to know where you might have those methane leaks?
• 31:09
  SPEAKER_00: And I think that's where it can also be very tricky for companies.
• 31:13
  SPEAKER_02: I I couldn't agree more.
• 31:14
  SPEAKER_02: And I think the sustainability office is where they start.
• 31:17
  SPEAKER_02: But what ends up what I've heard ends up happening in a lot of cases is they go around to these different departments and it doesn't resonate.
• 31:25
  SPEAKER_02: It because they're the sustainability office is leading with we need to decarbonize, not hey, we're leaking methane.
• 31:32
  SPEAKER_02: And did you know that there's a regulation that might be coming five years from now that's gonna fine us?
• 31:37
  SPEAKER_02: It's it's I think the sustainability office has a really unique opportunity to kind of rally the other major business units in the business, the most material ones, frankly, and try to unpack how they're incentivized, what matters to them, what risks exist, and put together a package that isn't just that number.
• 31:57
  SPEAKER_02: Say to them, we need to decarbonize this factory for this reason.
• 32:00
  SPEAKER_02: We need, you know, we need to look at plastics packaging because did you know that there's a coalition for the business plastics treaty that's trying to get the UN to do something?
• 32:08
  SPEAKER_02: Like this is gonna be a problem for us soon.
• 32:11
  SPEAKER_02: It's that type of conversation I think we need to move to.
• 32:14
  SPEAKER_00: So one of the things you alluded to that I want to dig in a little more is in the US, sort of this pullback on ESG goals, or maybe companies are still doing things, but they're not reporting it.
• 32:24
  SPEAKER_00: And otherwise, how do you think that fits in then to this broader conversation?
• 32:28
  SPEAKER_02: That is a tough question to ask because it's there's a lot of focus today from those companies on reputational risk management.
• 32:36
  SPEAKER_02: And it's like reporting is one work stream.
• 32:39
  SPEAKER_02: I'd say the next biggest focus is probably how are we doing this at the intersection of our brand?
• 32:45
  SPEAKER_02: Because brand, as you know, like intangibles have a huge value, and brand is one of the biggest that they have.
• 32:51
  SPEAKER_02: What I think they're missing, though, is the practicality of execution and how to actually do the things they need to in order to transition to a sustainable business.
• 33:01
  SPEAKER_02: I don't know, honestly, in this pullback, how that's really happening.
• 33:05
  SPEAKER_02: Where I see it emerging the most is in coalitions.
• 33:09
  SPEAKER_02: But what I'm worried about is that there's a lot of attention going to some of those coalitions for antitrust issues.
• 33:15
  SPEAKER_02: We saw this in the financial services sector with all the net zero alliances and people pulling out.
• 33:20
  SPEAKER_02: But I don't know that companies can address their most material or their most systemic risks, like going out to that impact side without working across the industry because they're all working in the same suppliers.
• 33:33
  SPEAKER_02: And if one downstream customer is telling the supplier one thing and another one's telling them to do something different, that inconsistency, and I see it, causes thrashing.
• 33:44
  SPEAKER_02: Like, I got to do everything, get me the data, what can we do to put this off for another three years?
• 33:49
  SPEAKER_02: We really have to figure out a way to work together to defend against antitrust concerns to lift these value chains up.
• 33:56
  SPEAKER_00: Yeah, and I think you know, that's a challenge that we've spent, I've heard various conversations this week talking about value chain and talking about the fact that the company buying the product or buying the service, whatever it is, you are in a position of power in some cases.
• 34:12
  SPEAKER_00: In other cases, maybe that factory is supplying a thousand different customers.
• 34:17
  SPEAKER_00: And so also thinking about as a company where you have the ability to influence change and starting there.
• 34:24
  SPEAKER_00: And to your point, maybe you you know you do need to work with others in your industry, but maybe there's some suppliers that you're their main customer.
• 34:31
  SPEAKER_00: So that so those are the ones that you can start with, but it's still quite a challenge.
• 34:36
  SPEAKER_02: It absolutely is.
• 34:36
  SPEAKER_02: And one of the things that I would encourage companies to think about is not leading with the impact because you don't want to have a supplier who's very high carbon emitting, but it turns out that they're in a global south country without access to green energy.
• 34:50
  SPEAKER_02: And if you pull out of them, just you know, disengage.
• 34:53
  SPEAKER_02: We talk about disengagement on the um or divestment on the financial services side.
• 34:58
  SPEAKER_02: If you effectively divest from that supplier, you're gonna probably create worse issues for that community that you've been supporting.
• 35:04
  SPEAKER_02: So, and this is one of the other reasons I like the E, S and G together, because considering that social pillar is also something that kind of is really critical because in the end, you want to make sure that you're you know, you're at least saving somebody.
• 35:18
  SPEAKER_00: Yeah, and I think, you know, it's interesting you mentioned the IRA earlier.
• 35:22
  SPEAKER_00: And one of the things about the IRA that I know was very appealing when it first came out was this idea that you get extra, you can get extra money if you are investing in places where maybe there was a coal factory that, you know, or a coal mine that shut down, or where you are, you know, helping that local community, because I think there is this balance that you can do well.
• 35:44
  SPEAKER_00: But if you just shut down a coal generation plant and then you leave, well, so now this community has doesn't have the jobs, they don't have the property tax revenue.
• 35:54
  SPEAKER_00: There's all these other side impacts.
• 35:56
  SPEAKER_00: So I think you have to design to have, again, balance there.
• 36:00
  SPEAKER_02: Yeah, that holistic approach and the way that you described it is exactly what I think we need.
• 36:04
  SPEAKER_00: Yeah.
• 36:05
  SPEAKER_00: So then I have to ask another follow-up question because you mentioned restatement of goals there.
• 36:09
  SPEAKER_00: And I should have pulled on this earlier when you you mentioned it.
• 36:11
  SPEAKER_00: Because I think for a lot of companies, this idea of we set these goals and they maybe were more set from a marketing perspective or not really thought through from a business imperative perspective.
• 36:23
  SPEAKER_00: And then now, fast forward, and the company's being forced to say, well, these are our goals, but these aren't really our goals.
• 36:30
  SPEAKER_00: A lot of companies, though, don't want to then back down on them.
• 36:35
  SPEAKER_00: And so as you're you talk about restating, as you're talking to to companies or looking at reports for this happening, again, what advice would you give if someone's saying, well, but these goals were out there.
• 36:47
  SPEAKER_00: What are people going to think if we change them?
• 36:48
  SPEAKER_02: Yeah, I think I'm currently writing about this in my newsletter, actually.
• 36:51
  SPEAKER_02: So perfect timing.
• 36:52
  SPEAKER_02: There you go.
• 36:53
  SPEAKER_02: So I think it depends on what kind of company you are.
• 36:56
  SPEAKER_02: And there's three types of companies that I've at least observed, but I don't think one company ever fits into one category.
• 37:02
  SPEAKER_02: There are followers who kind of did it to your point, marketing, and everybody was doing it.
• 37:06
  SPEAKER_02: There are those who really wanted to lead with purpose, and there are very few of those companies, but they really led with sustainability and we're going to change the world.
• 37:14
  SPEAKER_02: Their employees are fueled.
• 37:16
  SPEAKER_02: And then the one that I'm writing about next is kind of that pragmatist who is recognizing that there is a material issue here that they need to address.
• 37:23
  SPEAKER_02: Um, I think you have to recognize where you're starting from and then go from there.
• 37:28
  SPEAKER_02: But again, I think the biggest thing you can do is make it material to your business and focus on consistency year over year from that pivot.
• 37:37
  SPEAKER_02: And, you know, there there have been some pretty high-profile companies that have caused employee dissatisfaction by restating their goals.
• 37:44
  SPEAKER_02: When I dug into it, I understand the frustration, but I can see that they're really shifting to that pragmatic approach where they're trying to make an impact as only the company can.
• 37:54
  SPEAKER_02: And you can't fault the company for that because not they, you really can't fix these systemic issues in a vacuum.
• 38:02
  SPEAKER_02: No, you have to do it with partnerships and even not only peer partnerships, but public-private partnerships and everything else.
• 38:09
  SPEAKER_02: And those, I'm sure those big companies are still working on those.
• 38:13
  SPEAKER_02: The focus needs to be what can the company do to make sure it's around to solve these problems in the long term.
• 38:18
  SPEAKER_00: Well, and I especially think in the context, going back to our theme of reporting or the theme of our podcast of reporting, in the context of moving from voluntary to regulated reporting, now is the time.
• 38:30
  SPEAKER_00: Like if you are going to change your goals, you don't want to have done your regulated reporting for two years and then suddenly say, uh, those aren't actually our goals.
• 38:39
  SPEAKER_00: And maybe you need to change your goals.
• 38:41
  SPEAKER_00: And I'm not to say your goals will never change, but you want to make sure you've at least done that diligence and been pragmatic before you put that in a regulatory filing.
• 38:50
  SPEAKER_02: And you have to be transparent.
• 38:52
  SPEAKER_02: Like just what boggles my mind all the time is how companies will come to these decisions fairly rationally, but they don't explain how they came to those decisions.
• 39:02
  SPEAKER_02: Talk to your stakeholders, put it in your CSR report.
• 39:05
  SPEAKER_02: Hey, we had this goal, we realized that we weren't going to meet it because of these three reasons.
• 39:10
  SPEAKER_02: Instead, what we're going to do is focus on this business imperative and try to make an impact over here.
• 39:15
  SPEAKER_02: Perfectly reasonable explanation.
• 39:17
  SPEAKER_02: I think, now, granted, there will be activists that will get upset, but if you are transparent, at least it's defensible then.
• 39:24
  SPEAKER_00: Yeah.
• 39:25
  SPEAKER_00: So then what as you were writing your book, I guess, was there anything that surprised you or that wasn't, you know, as you dug deeper into something that, you know, there was more to it than what you expected?
• 39:38
  SPEAKER_02: Yeah, there was a chapter that I really struggled with on intangibles.
• 39:43
  SPEAKER_02: And what I came to realize, I was trying to figure out, you know, with intangible value rising, how does that intersect with ESG, which is another intangible?
• 39:51
  SPEAKER_02: And what I came to realize is ESG's real value is in that interconnected nature that we just talked about.
• 39:59
  SPEAKER_02: And I ended up writing a whole chapter about it and even putting in some examples that I was thinking through.
• 40:05
  SPEAKER_02: And what I often point to is the World Economics, uh, World Economic Forum's polycrisis is what they called it in their global risks report a couple of years ago.
• 40:13
  SPEAKER_02: Those interconnected risks, ESG is kind of an interconnected tool to deal with those interconnected risks.
• 40:21
  SPEAKER_02: And looking at the crises, those polycrises that surround all companies now today, with the rise of globalization, with the rise of intangibles, it's it really makes ESG something that I think companies are not focused on.
• 40:35
  SPEAKER_02: And it's just it's mind-boggling to me because there is a tool available that it's and this is the other reason why I called it mindset, was because it it really is a shift in how you're thinking about how you interact with the world and how the world interacts with you.
• 40:49
  SPEAKER_00: So maybe to that point, I want to go back to reporting.
• 40:52
  SPEAKER_00: Yeah.
• 40:53
  SPEAKER_00: Because now, if we fast forward two years from now, let's say, so you've had the wave one and the wave two uh CSRG, ESRS reporters, and then you are we would be getting close if I'm thinking of my math right.
• 41:05
  SPEAKER_00: And then we would have had started to see some reports under ISIS B and otherwise.
• 41:09
  SPEAKER_00: So now put aside that reporting is is, you know, you have to have actual change.
• 41:15
  SPEAKER_00: You can't just have reporting, but at the same time, all this visibility now into transition plans, into how much carbon, into social and how companies treat their workforce, affect communities, and otherwise.
• 41:27
  SPEAKER_00: Do you think then that there will be that might also spur change for companies that aren't otherwise, you know, because they have all these other crises they're dealing with that aren't really focused on this?
• 41:39
  SPEAKER_02: You know, I'm not sure because I don't know that the execution is going to be there in that way.
• 41:45
  SPEAKER_02: Like reporting is one thing and putting it down on paper and having that paper accountability, and even what's what some of the um EU countries are like trying to implement around CSRD, I just don't know because I I talked to so many chief sustainability officers, and I'm like, yes, you're doing CSRD, yes, you're reporting your greenhouse gas emissions, but like year three, when that is still going up because your revenues are still going up, what have you done?
• 42:14
  SPEAKER_02: You can't, and I this is actually what I think is going to happen in the next two to three years.
• 42:19
  SPEAKER_02: A lot of companies are just hitting a stage, I think, where decarbonization is actually getting hard.
• 42:25
  SPEAKER_02: Like they've they've done their renewable energy contracts and power purchase agreements, they've replaced all the LEDs in their office buildings, you know, they've accounted for travel, they've maybe made some investments, they've hit a wall.
• 42:36
  SPEAKER_02: And I'm starting, I'm starting to sense that really in these conversations.
• 42:41
  SPEAKER_02: And I think in two to three years, stakeholders, especially financial services firms, are going to start asking, what have you done?
• 42:48
  SPEAKER_02: Because we need to transition.
• 42:51
  SPEAKER_02: Like, this isn't just like we're not gathering this data just so that we can throw capital around and invest in your stock or add it to a fund.
• 42:58
  SPEAKER_02: There is actual work that we expect you to do.
• 43:00
  SPEAKER_02: Now, whether or not the financial services markets are actually funding that work is a different question, or whether governments are, but that work needs to happen regardless.
• 43:08
  SPEAKER_02: And when we find ourselves in a situation 10, 20 years from now where, you know, we're at 2.0 degrees Celsius and companies are shutting down because they can no longer operate, that's gonna be a big problem.
• 43:21
  SPEAKER_02: And now suddenly the issues, the issues that we had been fearing all become material all at the same time.
• 43:27
  SPEAKER_02: And we can't be in that situation.
• 43:29
  SPEAKER_00: No, and I think especially because if you look at it, it's going to start to accelerate towards that.
• 43:34
  SPEAKER_00: And so it's it's gonna be harder to also solve the problem the further along that you go.
• 43:40
  SPEAKER_00: But I do think, you know, I sort of there's a few sets of companies right now, right?
• 43:45
  SPEAKER_00: The ones that really have embraced it, they do see this the risk and opportunity associated with this and they're focused on it.
• 43:52
  SPEAKER_00: And then you have the ones that they know they have to report, and so they're taking the reporting very seriously.
• 43:58
  SPEAKER_00: And so then hopefully once All that data is there, it will drive change.
• 44:02
  SPEAKER_00: And then obviously you have the ones that are skeptical and otherwise.
• 44:06
  SPEAKER_00: And I it will be interesting to see what happens.
• 44:11
  SPEAKER_00: Will the financial services industry do something?
• 44:14
  SPEAKER_00: Will company management say, I don't want to disclose there's child labor in my value chain?
• 44:20
  SPEAKER_00: Or is people gonna shrug their shoulders?
• 44:22
  SPEAKER_00: And I guess hopefully, maybe coming off the optimist optimism of some of what we've heard this week in Climate Week, hopefully you're gonna see more companies move to that first category where they see this actually as a valuable tool, sort of to the point you made sooner.
• 44:36
  SPEAKER_02: Yeah, it's one word in what you just said struck me, which is the word more.
• 44:42
  SPEAKER_02: I was talking with somebody at Climate Week this week who was reminding me of the theme, it's time.
• 44:47
  SPEAKER_02: And I said, next year, I really hope the theme is we need to do more.
• 44:52
  SPEAKER_02: That needs to be the theme next year because we're already on this trajectory and we really can't wait.
• 44:57
  SPEAKER_02: And while I'm trying to get like really, I really like ESG because I think it helps companies drive resilience in their business.
• 45:05
  SPEAKER_00: Yeah, resilience is a great word.
• 45:06
  SPEAKER_02: But we still have to deal with these systemic problems, and I just don't know that we're getting there fast enough.
• 45:12
  SPEAKER_00: So then what would be the key takeaway if you could give a key takeaway from either this conversation or from your book?
• 45:19
  SPEAKER_02: Yeah, I think the key takeaway is if you're gonna try to address those big systemic issues, whether it's on your own or in a coalition, really start with your business first.
• 45:28
  SPEAKER_02: Come at these issues from your business because one, you're probably filled with purpose-filled employees who want to act.
• 45:35
  SPEAKER_02: And guess what?
• 45:36
  SPEAKER_02: Those employees know your business best.
• 45:38
  SPEAKER_02: And so they can be a real force multiplier for progress.
• 45:42
  SPEAKER_02: Two is try to address the systemic issues after you've dealt with your own business.
• 45:48
  SPEAKER_02: Like you actually, what I wrote in the book is like you don't put your air mask, you don't put your oxygen mask on before putting, you know, isn't that the thing?
• 45:55
  SPEAKER_02: And like you have to do it that way.
• 45:57
  SPEAKER_02: You have to put yours on first and then help the next person.
• 46:01
  SPEAKER_02: That's what we need to do here.
• 46:02
  SPEAKER_02: And while it seems like that might be an argument for inaction, it's not.
• 46:08
  SPEAKER_02: You have to understand your business, understand your intersection with this topic, at least work towards those projects consistently, and then start to address those bigger systemic issues.
• 46:18
  SPEAKER_00: So I had actually a follow-up question because one of the things actually we used to spend a lot of time talking about here on the podcast is so what if you are the controller or maybe you are working in the finance department or otherwise, and you are listening to this, like, I I believe this.
• 46:34
  SPEAKER_00: This is really important and something my company should be doing.
• 46:37
  SPEAKER_00: And then, or you know, you could be an officer, but you look around at the other officers and you look around at your company, and no one seems to care.
• 46:46
  SPEAKER_00: So, what advice do you give to them other than I have heard this advice before, find a new employer?
• 46:52
  SPEAKER_00: That's not the advice I'm looking for here.
• 46:54
  SPEAKER_00: What advice do you give then to the individuals who feel like there is change that needs to be made and their company could do something about it?
• 47:03
  SPEAKER_02: So I have two answers.
• 47:05
  SPEAKER_02: So I sit on the commercial side of sustainability, which means I'm in sales.
• 47:09
  SPEAKER_02: And this is kind of the same answer.
• 47:11
  SPEAKER_02: Uh, but I was also an English major, which means I like storytelling.
• 47:14
  SPEAKER_02: One of the most powerful tools I think we have is going back and looking at our company's history and finding these ESG instances that have happened in the past.
• 47:23
  SPEAKER_02: Like I when I mentioned earlier, like I had never heard about ESG.
• 47:27
  SPEAKER_02: And when I started thinking back on my career, I thought about the wildfires that shut down our data center because there was smoke going into the generators and we had to instantly enact our disaster recovery plan.
• 47:39
  SPEAKER_02: Like those stories exist at every company.
• 47:42
  SPEAKER_02: And think about what you would have done had you had a framework or the technology to address that issue proactively.
• 47:49
  SPEAKER_02: And how can you communicate that to your business to say, remember when we lost$10 million because of that wildfire?
• 47:56
  SPEAKER_02: Or remember when our supply chain was disrupted because of that flooding?
• 48:00
  SPEAKER_02: Let's think about this differently.
• 48:02
  SPEAKER_02: Don't even like, don't even have to mention it.
• 48:06
  SPEAKER_02: But those are the stories that create the power because people remember those times.
• 48:11
  SPEAKER_02: And we never really, everything like that used to be reactive, but it's accelerating now.
• 48:16
  SPEAKER_02: And those things are becoming more prevalent every day.
• 48:19
  SPEAKER_02: And so they're on your front doorstep.
• 48:21
  SPEAKER_02: And remember like reminding people about those instances, I think is a really powerful tool.
• 48:26
  SPEAKER_00: Yeah, I think that's great advice because again, to your point, if the person they're talking to connects wildfires to global climate change, great.
• 48:35
  SPEAKER_00: If not, it's still a real issue for your business that you have to think about what you're gonna do next time.
• 48:40
  SPEAKER_00: And that is the way to start to make change.
• 48:42
  SPEAKER_00: All right.
• 48:43
  SPEAKER_00: So any final words of wisdom then for our listeners?
• 48:46
  SPEAKER_00: It's been great talking to you today.
• 48:48
  SPEAKER_02: Oh my gosh.
• 48:49
  SPEAKER_02: The the last thing I think we we talked about reporting quite a bit.
• 48:53
  SPEAKER_02: When you publish a report, whether it's to a regulator or you know, your publicly available CSR report, you are effectively passing the value of that data to another stakeholder for another purpose.
• 49:06
  SPEAKER_02: And it may be used in all kinds of different ways, like ESG data aggregators, for example.
• 49:11
  SPEAKER_02: There is value in that data.
• 49:13
  SPEAKER_02: Look at the data in the context of your business, bring it back in, unpack it, and again, find those stories and then tell the story with the data that you need in order to drive action.
• 49:24
  SPEAKER_00: Yes.
• 49:25
  SPEAKER_00: All right.
• 49:25
  SPEAKER_00: Well, it's been such a pleasure to talk to you.
• 49:28
  SPEAKER_00: I appreciate so much you joining us uh today.
• 49:30
  SPEAKER_00: So thanks so much for being on.
• 49:32
  SPEAKER_02: Oh, absolutely, Heather.
• 49:33
  SPEAKER_00: Thank you.
• 49:34
  SPEAKER_02: All right.
• 49:35
  SPEAKER_00: That's our show for today.
• 49:37
  SPEAKER_00: Tune in next week for more fresh episodes.
• 49:40
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• 49:43
  SPEAKER_00: Follow the PwC Accounting Podcast wherever you listen to your podcasts.
• 49:47
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• 49:57
  SPEAKER_00: From Thought Leadership at PWC, I'm Heather Horn.
• 50:01
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