Latest / PwC's accounting podcast / Talking ESG and reducing GHG with a chief sustainability officer

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Talking ESG and reducing GHG with a chief sustainability officer · PwC's accounting podcast

• 0:00
  SPEAKER_00: Thought Leadership from PWC's National Office.
• 0:06
  SPEAKER_02: My advice, though, is you've got to come in knowing you're not going to know everything.
• 0:11
  SPEAKER_02: And that you've got to manage the learning curve for yourselves as you're evolving in that process, right?
• 0:19
  SPEAKER_01: Hello.
• 0:20
  SPEAKER_01: Today we're back talking ESG with our last but certainly not least key episode recorded during New York City Climate Week at the end of September.
• 0:30
  SPEAKER_01: Next week we'll return to our GHG miniseries, and today's episode is a perfect way to segue back with some perspectives on sustainability reporting directly from a Chief Sustainability Officer.
• 0:42
  SPEAKER_01: This is PWC's Accounting Podcast.
• 0:53
  SPEAKER_01: I'm Heather Horn, and thanks so much for joining us today.
• 0:56
  SPEAKER_01: In today's episode, we hear from Alison Anderson Book, Chief Sustainability Officer at Baker Hughes, whose impressive background in paleoclimate geology, the study of past climates and their causes, propelled her into the world of sustainability.
• 1:12
  SPEAKER_01: She shares the challenges overcome and accomplishments made in her short tenure at the company, including a focus on some of the practical challenges and GHG reporting.
• 1:22
  SPEAKER_01: There's certainly something for everyone to take away from today's conversation.
• 1:26
  SPEAKER_01: And if you enjoyed listening to today's episode, please join us next week, Thursday, November 7th at 1 p.m.
• 1:33
  SPEAKER_01: Eastern for more insights from Allison on our quarterly sustainability webcast.
• 1:37
  SPEAKER_01: Registration details can be found in the show notes.
• 1:40
  SPEAKER_01: And if you're listening to this after November 7th, still check out the show notes because you can find information on CPE eligible replays.
• 1:49
  SPEAKER_01: With that, here's my conversation with Allison.
• 1:53
  SPEAKER_01: So, Allison, welcome to the podcast.
• 1:55
  SPEAKER_01: So nice to have you on today.
• 1:56
  SPEAKER_01: And I'm excited to hear about your company and about what you're doing here for Climate Week and uh and to share some of this information with our listeners.
• 2:04
  SPEAKER_01: But maybe to start things off, I would definitely like to talk about Baker Hughes, but let's talk a little bit about your background first and sort of how you got to where you are and what your focus is.
• 2:17
  SPEAKER_01: So, well, hello.
• 2:18
  SPEAKER_02: Thank you for having me.
• 2:19
  SPEAKER_02: Uh really appreciate the opportunity to come and join the podcast fun.
• 2:23
  SPEAKER_02: Uh I am actually uh I'm a geologist, and so uh that's something a lot of times that you don't see too many geologists going into the universe of of sustainability.
• 2:34
  SPEAKER_02: I think they do go in there, but they don't, you don't always know that they are.
• 2:38
  SPEAKER_02: They they double or triple hat.
• 2:40
  SPEAKER_02: My background is I've spent, I started out a very technical person.
• 2:44
  SPEAKER_02: And while I don't do as much technical things within the field of geology today, I spent a lot of time in the technical space of accounting for greenhouse gases and and other aspects of this.
• 2:55
  SPEAKER_02: The um the path that I took to get here was pretty, pretty different.
• 2:58
  SPEAKER_02: I I first started coming out of school as um someone who said, I'm never gonna go and work for an oil and gas company.
• 3:06
  SPEAKER_02: And uh my advisor required that I interview and uh and then I was offered um uh an internship and then a subsequent uh position.
• 3:15
  SPEAKER_02: And the reason I chose that um particular organization is a couple weeks into the internship, I realized I'm doing more in a summer from a science standpoint than I did for a couple years of my PhD.
• 3:29
  SPEAKER_02: And so, and then the the quality of the data was unreal.
• 3:33
  SPEAKER_02: And so while people tend to um look at oil and gas companies with a certain lens, uh world-class science uh lives lives and breathes within the halls of any sort of a mineral resource organization.
• 3:48
  SPEAKER_02: And so um in the back of my mind though, I had when I was an undergraduate saying I would never go into this, I had there was uh posted on our bulletin board in the student lounge was this flyer for congressional science fellowships.
• 4:02
  SPEAKER_02: And I was like, hmm, that looks really interesting.
• 4:04
  SPEAKER_02: I don't know what that means.
• 4:05
  SPEAKER_02: I'm gonna I'm gonna take this with me.
• 4:07
  SPEAKER_02: And so I took down the flyer which had those little rip-off tabs, and I carried that with me for like 10 years.
• 4:13
  SPEAKER_02: Oh, wow.
• 4:14
  SPEAKER_02: Yeah, until I finally was at a point where I could apply.
• 4:18
  SPEAKER_02: And I still didn't really know what it meant, but I thought, I just gotta see what that is.
• 4:22
  SPEAKER_02: And to my surprise, I actually um was selected to represent the American Geosciences Institute and I went to DC and never looked back.
• 4:30
  SPEAKER_02: And so I sp I've spent the last um 15 plus years looking at the nexus of technical science and geoscience in particular, policy, and how we engage people on consensus-driven policy.
• 4:42
  SPEAKER_01: Very interesting, and a lot there for our listeners.
• 4:45
  SPEAKER_01: But one of the things I always like to make sure we know our terms, and since most of our audience is coming from an accounting background, when you say paleo climate, what does that exactly address?
• 4:55
  SPEAKER_02: All right, so that's great.
• 4:56
  SPEAKER_02: So on the so people think about climate science, it's like a big umbrella today, and it's very multidisciplinary, and so it crosses a bunch of domains.
• 5:06
  SPEAKER_02: But a lot of times people think, oh, they study the weather.
• 5:09
  SPEAKER_02: Uh, yes and no.
• 5:10
  SPEAKER_02: Paleo climate means it's it's that field of climate science, but looking at historical records, right?
• 5:17
  SPEAKER_02: And so the the brand of climate science that I worked on was the last couple million years, which is not so old.
• 5:24
  SPEAKER_02: And then I was looking at the surficial processes around the last um glacial and interglacial periods.
• 5:32
  SPEAKER_02: And so so that was kind of the rock record that I was looking at at that time.
• 5:36
  SPEAKER_02: Uh, you know, but geologists have this phrase like that present is the key of the past, and vice versa.
• 5:41
  SPEAKER_02: And so a lot of what you can extract from a paleo paleo-scientific standpoint um helps us understand the the current and vice versa.
• 5:50
  SPEAKER_01: All right, very interesting.
• 5:51
  SPEAKER_01: So then, as you you mentioned that you're very focused then now on GHG reporting and accounting and otherwise, and that is of great interest to many of our listeners because we've spent a lot of time talking about that topic.
• 6:05
  SPEAKER_01: And in particular, you know, this is something for most companies, many of them have potentially been reporting their GHG emissions, but now under these new required frameworks and otherwise, there's a lot more focus and interest.
• 6:18
  SPEAKER_01: And so just curious, you mentioned the role, like the intersection with policy and otherwise.
• 6:23
  SPEAKER_01: And so if you are thinking about the role of reporting, then in helping address some of the it the broader issues we're looking at, what how do you think about that?
• 6:34
  SPEAKER_02: Well, I mean, you know, we can we can unpack that a little bit more.
• 6:38
  SPEAKER_02: The the reporting part is sort of it's not the main event, right?
• 6:44
  SPEAKER_02: I think too often we're we get caught up in the how do you count things when the reality and what we're talking about with respect to the client, the current climate condition is we want to account for things to show that we're progressing something.
• 6:57
  SPEAKER_02: All right.
• 6:58
  SPEAKER_02: So it's got to have a lot of real fidelity around it, lest you be accused of greenwashing.
• 7:02
  SPEAKER_02: And so that's where a lot of that rigor is applied.
• 7:06
  SPEAKER_02: It's worth noting as it as like on that journey to get here.
• 7:10
  SPEAKER_02: A big part of the appeal for me on the sustainability side and where we're at now is when I started, I was in the the two most detail-oriented parts of the company, really.
• 7:19
  SPEAKER_02: I worked on uh petrophysics that has you looking at data that you collect, and then you're using that to extrapolate and actually uh project the reserves booking.
• 7:29
  SPEAKER_02: Okay.
• 7:29
  SPEAKER_02: And so, like that's the beginning of what while I didn't go into finance, it all comes back around full circle as you're looking at how are you accounting for the molecule, and now I'm looking at how do you account for, you know, it's it's molecular, but also then you're accounting for electrons and you're accounting for a lot of different things you wouldn't have measured before.
• 7:48
  SPEAKER_01: Yeah, it's interesting, but so it's interesting also you referenced screenwashing and also the fact that reporting is important to show progress.
• 7:56
  SPEAKER_01: But given some of the, I'll use the word deficiencies in the current frameworks for reporting GHG emissions, I think there are a lot of cases where there are inconsistencies, or as companies are learning more, maybe they're showing a reduction, but it's just because they weren't measuring things properly before, or vice versa.
• 8:16
  SPEAKER_01: And so, how do you think about that then in this broader landscape?
• 8:20
  SPEAKER_02: Yeah, I'm glad that you brought that up.
• 8:21
  SPEAKER_02: So when I came into this role, actually, before I even what they called and interviewed me, I was I was running that same organization that I got the fellowship actually.
• 8:31
  SPEAKER_02: And so um, so I was I was contemplating my future when they called.
• 8:35
  SPEAKER_02: And they said, you know, this is about the energy transition.
• 8:38
  SPEAKER_02: The first thing I did was look up Bigger Hughes's um CSR.
• 8:43
  SPEAKER_02: Okay.
• 8:43
  SPEAKER_02: Back then it was just called uh I don't even know what we call it, corporate responsibility or something.
• 8:48
  SPEAKER_02: Yeah.
• 8:48
  SPEAKER_02: And I looked at what we had disclosed to the CDP, and I knew we were underreporting.
• 8:55
  SPEAKER_02: Okay.
• 8:56
  SPEAKER_02: Like it was very obvious to me because like I know the I know the company well enough because I was on the customer side at Baker Hughes years ago.
• 9:02
  SPEAKER_02: And in between there, I was up on the hill and worked a lot with all of the the companies in in question.
• 9:07
  SPEAKER_02: So I very much understand that business.
• 9:10
  SPEAKER_02: So so the parts that were missing, it wasn't due to anything, you know, um deliberate.
• 9:16
  SPEAKER_02: Yeah, or nefarious.
• 9:17
  SPEAKER_02: No, not at all.
• 9:18
  SPEAKER_02: It's just like they didn't know how to go find the data, for instance, right?
• 9:22
  SPEAKER_02: Or just um like asking, like, do we have vessels?
• 9:25
  SPEAKER_02: And then people be like, huh, we have vessels.
• 9:27
  SPEAKER_02: We should include vessels.
• 9:28
  SPEAKER_02: And so it was just like the awakening of a team who may not have known the full business.
• 9:34
  SPEAKER_02: And so the legacy reporting that we had was pre-merger reporting of only Baker Hughes.
• 9:41
  SPEAKER_02: And so suddenly that that small group that was doing the the accounting had to account for much, much larger organization, right?
• 9:49
  SPEAKER_02: And so so they weren't as familiar with the business.
• 9:51
  SPEAKER_02: So when you take a look at the business, that was your that's your starting block.
• 9:55
  SPEAKER_02: All right.
• 9:56
  SPEAKER_02: So the fidelity becomes really important, and then understanding how to connect it back in and saying, okay, we underreported now what?
• 10:04
  SPEAKER_02: So what we did was we just started it over and hit a hard reset.
• 10:09
  SPEAKER_02: And that made a lot of sense.
• 10:11
  SPEAKER_02: I mean, it had I communicated up to the board level and said, while we made our commitment off of um 2019, we were using like a 2012 baseline.
• 10:21
  SPEAKER_02: Wow.
• 10:21
  SPEAKER_02: Okay.
• 10:22
  SPEAKER_02: Yeah.
• 10:22
  SPEAKER_02: And so that wasn't gonna work.
• 10:23
  SPEAKER_02: And so we ended up going back, I said, let's reset it.
• 10:26
  SPEAKER_02: This is a brand new company under the greenhouse gas guidelines, the protocols guidelines.
• 10:31
  SPEAKER_02: We have to recast that baseline anyway.
• 10:33
  SPEAKER_02: Yes.
• 10:33
  SPEAKER_02: And so let's do it and let's put some assurance on it.
• 10:36
  SPEAKER_02: And then that was that was that moment in time when we started that in 2020 and never looked back.
• 10:42
  SPEAKER_01: Wow.
• 10:42
  SPEAKER_01: And so I'm taking from the description that the number was higher.
• 10:48
  SPEAKER_01: Much higher.
• 10:48
  SPEAKER_02: It was about so so that back then we were only looking at scope one or two.
• 10:52
  SPEAKER_02: And so the number was roughly about 26% uh too low for scope one or two.
• 11:01
  SPEAKER_01: Wow.
• 11:01
  SPEAKER_01: And so then again, which is not uncommon.
• 11:04
  SPEAKER_01: No, I well, I agree.
• 11:05
  SPEAKER_01: And that's partly why I wanted to have this part of the conversation, because I think it's very interesting for people, is that to your point, if you don't know where you're starting, then you can be showing a reduction, but you weren't measuring the right amount to begin with.
• 11:17
  SPEAKER_01: Or for some companies, they may be even showing an increase because now there's more attention, there's better data, they're identifying uh more sources.
• 11:25
  SPEAKER_01: For example, I was talking to one of our GHG specialists, and he was mentioning he was at a client site and he was asking them about emissions like gener from generation power plant.
• 11:36
  SPEAKER_01: And they're like, Oh, well, we don't have that.
• 11:37
  SPEAKER_01: He's like, I'm looking at like some self-generation that's like right here.
• 11:42
  SPEAKER_01: And so it's like, oh, well, yes, I guess we should be cutting that.
• 11:45
  SPEAKER_01: And so, you know, it's that that type of thing.
• 11:47
  SPEAKER_01: But maybe since I I jumped ahead a little in the conversation, you gave a brief amount of detail, but can you explain what Baker Hughes does and sort of the the broader sense of the company that we can dive into?
• 11:59
  SPEAKER_01: Oh, yeah, we did just we just well that's my fault because I just get excited.
• 12:04
  SPEAKER_02: Okay, so uh Baker Hughes is this I I've been fascinated with Baker Hughes, the legacy company, and then who we are today for a long time because it's a very old company.
• 12:13
  SPEAKER_02: And so one part being heavily nested in oil field service and equipment, and the other part being in a range of applications.
• 12:20
  SPEAKER_02: Um I would say sub-sea, you know, oil and gas production.
• 12:25
  SPEAKER_02: There's non-dis non-destructive testing, which hardly anyone knows that we do, but we're a very big player in that community.
• 12:32
  SPEAKER_02: Valves, turbines, compressors.
• 12:35
  SPEAKER_02: We've been in the the world of hydrogen for 100 years, right?
• 12:38
  SPEAKER_02: So hydrogen is not new.
• 12:39
  SPEAKER_02: Yes.
• 12:40
  SPEAKER_02: Right.
• 12:40
  SPEAKER_02: The first uh compressor, I think, was in the the the early you know 20th century around 2017 or excuse me, 1917 or something like that.
• 12:51
  SPEAKER_02: Uh I probably have the year on, don't quote me on that.
• 12:53
  SPEAKER_02: So the um, but it's been a long time.
• 12:55
  SPEAKER_02: And so that that company as we've evolved uh has diversified.
• 13:00
  SPEAKER_02: And so our core customer base is in a is in kind of a bit of a shift now as we have added things on.
• 13:07
  SPEAKER_02: It's we're really focused on industrial energy technology today.
• 13:12
  SPEAKER_02: And so the the physical footprint of the company more closely resembles, I would say the emissions footprint more resembles manufacturer than it does this classic oil field service company.
• 13:24
  SPEAKER_02: All right.
• 13:25
  SPEAKER_02: And so I say that because it's really important to think about then how you go about abating for yourself and your customer if it's heavily skewed towards the manufacturing side.
• 13:35
  SPEAKER_02: And so today we have a climate technology solutions uh PL, and that has a lot of the same tech, but in a new application for carbon capture and storage, geothermal, anything in the subsurface, we can play in that.
• 13:49
  SPEAKER_02: Um hydrogen, we look at methane management as well.
• 13:54
  SPEAKER_02: So there's a big swath of technology that goes under that as well.
• 13:58
  SPEAKER_02: So we're not simply that old Baker Hughes name anymore.
• 14:02
  SPEAKER_01: And so, as again, if someone's listening and thinking, okay, that's that's great, but I'm not in any of those fields, or this doesn't really impact me, then how do you answer that question?
• 14:13
  SPEAKER_02: Well, it does because we all need power, right?
• 14:16
  SPEAKER_02: We all need fuel.
• 14:17
  SPEAKER_02: We all need to know that when someone made some sort of phone technology that it's been inspected to work.
• 14:26
  SPEAKER_02: Okay.
• 14:27
  SPEAKER_02: So without realizing it, our company actually inspects a range of technology, whether it's going to be car batteries to phone batteries and what have you.
• 14:36
  SPEAKER_02: Um there was this old story that someone had told me that it used to be one in five batteries.
• 14:42
  SPEAKER_02: Um the way that they they used to uh coming off of the machine line, they would cut open one in five to see if it was assembled correctly.
• 14:51
  SPEAKER_01: I know I know.
• 14:52
  SPEAKER_01: Okay, it's like I just had a visceral reaction for our CS benefit.
• 14:56
  SPEAKER_02: And which was mine too.
• 14:57
  SPEAKER_02: And so if you cut up 20%, that just goes to a landfill or a recovery system.
• 15:01
  SPEAKER_02: Think about one, the emissions, two, just the waste.
• 15:04
  SPEAKER_01: Yes, and those precious minerals that are in there.
• 15:07
  SPEAKER_01: Yes.
• 15:07
  SPEAKER_02: Okay, yes.
• 15:08
  SPEAKER_02: Okay, so so when people think, okay, this doesn't impact me, in fact, there's a lot that we do behind the scenes.
• 15:14
  SPEAKER_02: Like I like to think about Baker Hughes as that um wonderful company that if all is going well, no one even knows we exist, right?
• 15:22
  SPEAKER_02: We work behind the scenes to make sure that we've got reliable power, um, reliable fuel production, um, etc.
• 15:30
  SPEAKER_02: The other aspect is we've got a part of our business that looks at condition monitoring.
• 15:35
  SPEAKER_02: This is um sensors and uh a digital tech stack that allows you to understand, say, on a wind turbine.
• 15:43
  SPEAKER_02: So a lot of our um sensors might go on a wind turbine because it's rotating machinery.
• 15:48
  SPEAKER_02: We really do specialize in rotating machinery in particular.
• 15:52
  SPEAKER_02: And that's gonna be uh making sure that that turbine's functional, what's the health of it, et cetera?
• 15:57
  SPEAKER_02: And so a lot of our sensor kit ends up in a range of different uh applications around the world.
• 16:03
  SPEAKER_01: So you have to go back to the batteries.
• 16:05
  SPEAKER_01: So what do you do now instead of cutting open one and five?
• 16:08
  SPEAKER_02: Oh, okay, so just so that everybody knows, we don't actually make the battery.
• 16:12
  SPEAKER_02: We have something called WayGate, and this is uh this is a non-destructive testing.
• 16:16
  SPEAKER_02: And so we make the machines that people can buy and then basically use that to look inside of an object without destroying it, right?
• 16:25
  SPEAKER_02: That makes a lot of sense.
• 16:26
  SPEAKER_02: And so the machines can be small and they can be like this big as the car.
• 16:30
  SPEAKER_02: Yes.
• 16:30
  SPEAKER_02: So there's a big range of different um kinds of machines.
• 16:33
  SPEAKER_02: We also have something called inline inspection, which could allow you to like pipelines, any kind of pipeline.
• 16:38
  SPEAKER_02: So it isn't oil and gas specific.
• 16:40
  SPEAKER_02: Um little little instruments that like go through crawl through and can look from the inside out, and then also the outside in at a mobile capacity.
• 16:49
  SPEAKER_02: And then looking for like leaks and otherwise.
• 16:51
  SPEAKER_02: Yeah, yeah.
• 16:51
  SPEAKER_02: Any kind of pitting, like any anything that you wouldn't want to just looking at the overall quality of a pipeline.
• 16:58
  SPEAKER_01: Yeah.
• 16:59
  SPEAKER_01: So okay, that's very helpful.
• 17:01
  SPEAKER_01: And yes, I wasn't suggesting you made the batteries, but I knew there had to be an end to that story.
• 17:05
  SPEAKER_01: Yeah.
• 17:05
  SPEAKER_01: We didn't want to leave uh our listeners thinking that people are still.
• 17:08
  SPEAKER_02: Yeah, so people go check it out.
• 17:10
  SPEAKER_02: Go check out Wiggate.
• 17:10
  SPEAKER_02: It's it's one of my favorite technologies that we have because no one realizes we have it.
• 17:14
  SPEAKER_02: And I like to make sure that people see that as an industrial energy tech company, you want to have a way to inspect things, right?
• 17:24
  SPEAKER_02: Period.
• 17:25
  SPEAKER_02: Right, right.
• 17:25
  SPEAKER_02: Yeah, we use it to inspect our own tools.
• 17:27
  SPEAKER_01: Yeah.
• 17:28
  SPEAKER_01: So then to that point, I guess one of the questions I think that we get is that if you look at, you know, your business, you also you're helping people reduce emissions, but obviously in the process of that, you're creating emissions.
• 17:41
  SPEAKER_01: And so how are you thinking about your own emissions profile?
• 17:44
  SPEAKER_01: And the, you know, you made the point about reductions.
• 17:47
  SPEAKER_02: Yeah.
• 17:47
  SPEAKER_02: So this is really complicated.
• 17:49
  SPEAKER_02: The um it depends on whether we're talking about I I'm gonna, I'm gonna see I'm gonna set the scene for a minute, and then I'll remind me to come back and answer the question.
• 17:58
  SPEAKER_02: Okay.
• 17:58
  SPEAKER_02: Okay.
• 17:59
  SPEAKER_02: So basically, uh the the our footprint is less than a percent, is our scope one and two emissions.
• 18:07
  SPEAKER_02: Okay.
• 18:08
  SPEAKER_02: Okay.
• 18:08
  SPEAKER_02: Our supply chain is about two-ish percent of our total.
• 18:13
  SPEAKER_02: And then our the use of our sold products so that for the wonky people out there, it's the cat 11 of scope three.
• 18:20
  SPEAKER_02: That is 97%.
• 18:21
  unknown: Okay.
• 18:22
  SPEAKER_02: Wow.
• 18:22
  SPEAKER_02: Yeah.
• 18:23
  SPEAKER_02: And so when I say our emissions resemble that of a manufacturer, that is why.
• 18:28
  SPEAKER_02: Okay.
• 18:28
  SPEAKER_02: And so we break it down by our two segments, and and uh they look a little different because one has more field base, the other one's in in um big rotating machinery.
• 18:38
  SPEAKER_02: But basically, um when you look at that kind of a profile, how you go about abating it is going to be different than if you were just one half over the other, or say an oil and gas producer, right?
• 18:52
  SPEAKER_02: Like we sell equipment that that goes to other countries, governments.
• 18:57
  SPEAKER_02: We could sell into the government, we could sell it into so like a national oil company, we can sell it to um a steel manufacturer if they want to use gas turbines.
• 19:06
  SPEAKER_02: There's a there's a range of different kinds of sectors who can come in and buy power generation solutions, et cetera.
• 19:14
  SPEAKER_02: That point of sale is really important to us.
• 19:17
  SPEAKER_02: So currently, under the greenhouse gas protocol, CAT 11 is at the point of sale for the design life of I'm gonna get nerdy here.
• 19:24
  SPEAKER_02: No, that's good.
• 19:24
  SPEAKER_02: This is actually interesting.
• 19:26
  SPEAKER_02: Okay, all right, all right.
• 19:27
  SPEAKER_02: Keep going.
• 19:27
  SPEAKER_02: So I've I hear that this audience is very technical.
• 19:30
  SPEAKER_02: So this is your moment.
• 19:31
  SPEAKER_02: All right, so so basically at the point of sale.
• 19:34
  SPEAKER_02: So let's say we make um make a turbine.
• 19:37
  SPEAKER_02: And so that turbine today, we know we can sell it and that so we've got one that can be gas uh or can have a gas hydrogen blend.
• 19:46
  SPEAKER_02: And ultimately we want to see that go to 100% hydrogen.
• 19:49
  SPEAKER_02: We've got another one that can be 100% hydrogen.
• 19:52
  SPEAKER_02: So if you're gonna sell it at the point of sale, we know today they're gonna use it as gas, but it's designed to be a fuel mix, that complicates things because we don't actually know how the the company's gonna use it.
• 20:04
  SPEAKER_02: Right.
• 20:05
  SPEAKER_01: Yes, we were talking about this last week on a podcast.
• 20:07
  SPEAKER_02: So it's exact it's because it's as you design it, but when you're designing for flexibility, there's not enough, I would say, definition around that, okay, um, so that we feel comfortable in basically saying, okay, well, it could be this or it could be this.
• 20:25
  SPEAKER_02: Like, so do we disclose for the variety of instances?
• 20:28
  SPEAKER_02: We don't do that.
• 20:29
  SPEAKER_02: Yeah, so what do you do?
• 20:30
  SPEAKER_02: So we end up taking the that normalized.
• 20:33
  SPEAKER_02: So if if we if we know already they're gonna start it on gas, period, it's gas turbine.
• 20:40
  SPEAKER_02: Oh, for it's life, you assume?
• 20:42
  SPEAKER_02: Maybe.
• 20:43
  SPEAKER_02: Okay.
• 20:43
  SPEAKER_02: But when we know that the intent is they're gonna up the mix, we might go for the highest fuel mix because that's where we know they're gonna land.
• 20:51
  SPEAKER_02: Right.
• 20:52
  SPEAKER_02: And so the application becomes really important.
• 20:54
  SPEAKER_02: The um there are instances where we may sell a compressor compressor and it's not compressed gas, it could be compressing CO2 that's maybe gonna have a different profile.
• 21:05
  SPEAKER_02: We'll have the same kind of parasitic load.
• 21:08
  SPEAKER_02: By and large, there's gonna be an engineer that squeals out there because I think there is a little bit of a difference in compressing to CO2 versus natural gas.
• 21:16
  SPEAKER_02: But but by and large, then um there may be a difference between whatever it is we are compressing, but if it's negligible, we'd use the same standard for um the emissions that are generated.
• 21:30
  SPEAKER_02: So, so right now that keeps it from the double counting, right?
• 21:36
  SPEAKER_02: Because a lot of people go to double counting land.
• 21:39
  SPEAKER_02: And and so that's kind of a red herring to me because we're saying it's for the life of the product.
• 21:44
  SPEAKER_02: And most of the time you can think a lot of a lot of the what we make is a 20 year lifespan.
• 21:48
  SPEAKER_02: That's where we get hurt.
• 21:49
  SPEAKER_02: If we said that it was designed for a 10 year lifespan, oh, then it would have lower emissions, it would, but because we design our products to last, right?
• 21:59
  SPEAKER_02: Although some Would flip the script and say, well, but then you know, that's avoiding emissions down the road.
• 22:05
  SPEAKER_02: Right.
• 22:05
  SPEAKER_02: Although that yeah, that's the whole other question.
• 22:07
  SPEAKER_02: The whole other thing, which we should get to save, avoided, and removed emissions, because that is my favorite topic.
• 22:13
  SPEAKER_02: Okay.
• 22:13
  SPEAKER_02: I'm dotting it down.
• 22:14
  SPEAKER_02: Okay, she's dotting it down.
• 22:15
  SPEAKER_02: All right.
• 22:16
  SPEAKER_02: So then, so so this kind of sets the scene.
• 22:18
  SPEAKER_02: So we spend a lot of time, because your original question was like, how are we thinking about reducing emissions?
• 22:24
  SPEAKER_02: So it starts with design life of products because we know that right now under the current accounting structure, we've got to design so that that number ultimately goes down.
• 22:33
  SPEAKER_02: Now, that could also go down if we package something with it that's an abatement technology.
• 22:38
  SPEAKER_02: All right.
• 22:39
  SPEAKER_02: And so we look at when it goes into use, is there a full, let's say a CCS project was that was going into a CCS project and they're gonna capture everything and it's gonna go in the ground.
• 22:51
  SPEAKER_02: We would net out.
• 22:52
  SPEAKER_02: So we would show the emissions of the part, and then we come in and say, but it's going into a net zero ecosystem because there's there's Bateman on the backside, and we'd show both numbers.
• 23:02
  SPEAKER_02: We're currently working on how to do that.
• 23:04
  SPEAKER_02: That is above and beyond the greenhouse gas protocol.
• 23:06
  SPEAKER_01: Right.
• 23:06
  SPEAKER_01: And for the listeners' benefits, CCS carbon capture and storage.
• 23:09
  SPEAKER_01: Correct.
• 23:10
  SPEAKER_01: Yes.
• 23:10
  SPEAKER_01: Yes.
• 23:11
  SPEAKER_01: So I have so many follow-up questions.
• 23:13
  SPEAKER_02: I have much more to give you.
• 23:14
  SPEAKER_02: Okay, well, keep do you want to keep going?
• 23:16
  SPEAKER_02: Okay.
• 23:17
  SPEAKER_02: So then getting back to us.
• 23:18
  SPEAKER_02: So we think about designing products differently, all right?
• 23:21
  SPEAKER_02: We're also thinking about the iteration around products.
• 23:23
  SPEAKER_02: Now, in terms of our own operational footprint, we've got a very good handle on that.
• 23:28
  SPEAKER_02: We've had a net zero program in place.
• 23:30
  SPEAKER_02: We have one of the um, one of the very first employee-driven uh carbon reduction programs.
• 23:36
  SPEAKER_02: And we how do we set up a better framework for data production?
• 23:41
  SPEAKER_02: That's where it started.
• 23:42
  SPEAKER_02: Kicked around some ideas, and somebody said, Hey, you should think about hitching your wagon at cost out.
• 23:47
  SPEAKER_02: And I was like, Yes, I am with you.
• 23:51
  SPEAKER_02: And so we just simply named our carbon reduction program carbon out.
• 23:55
  SPEAKER_02: Let's take as much carbon out of our operations as possible.
• 23:58
  SPEAKER_02: We recently, like about a year ago, we expanded that into the scope three part, and that's still not as mature as our our scope one and two program, but we're getting there.
• 24:08
  SPEAKER_02: And so so we've got a very hands-on approach.
• 24:10
  SPEAKER_02: We're very serious, we don't use offsets.
• 24:12
  SPEAKER_02: Okay.
• 24:13
  SPEAKER_02: No offsets today.
• 24:14
  SPEAKER_02: Um, I don't see us needing to use an offset until the earliest is about 2037.
• 24:20
  SPEAKER_01: Wow.
• 24:20
  SPEAKER_01: And then by then, maybe you'll have made other changes before so you won't need them.
• 24:24
  SPEAKER_01: So let me ask a question, actually, going back to your um scope three category 11, because that's where we got so many questions, because you described like two products and just the issues potentially of estimating the scope three category 11.
• 24:40
  SPEAKER_01: Now multiply that by however many products you have.
• 24:42
  SPEAKER_01: We have thousands.
• 24:43
  SPEAKER_01: Yes.
• 24:43
  SPEAKER_01: So that's like an astronomical amount of data and other ones, which maybe appeals to you with your geology um background and your data background.
• 24:51
  SPEAKER_01: But it's a love school, but it is still a huge, I'm gonna use the word issue to manage all that data, all those assumptions.
• 24:59
  SPEAKER_01: And so, what are some of the practices you guys have in place to work through that?
• 25:03
  SPEAKER_02: Yeah, you know, the um the journey started with us just having a tighter, you know, 99.9% online to the greenhouse gas protocol way of doing things and having lockout tag out on numbers.
• 25:17
  SPEAKER_02: And so um, because it was muddy in the very beginning, and that's not a I'm not trying to discredit anybody who worked on it because it was a lot of evolution.
• 25:27
  SPEAKER_02: They did some great work then.
• 25:28
  SPEAKER_02: Okay, so I don't want to at all under undercut my what predecessor.
• 25:33
  SPEAKER_02: And so um, but where we're at today, we came in and said, while we're working on data leaks and doing some system architecture, let's make sure everybody knows and is upskilled, so to speak, on how to do carbon accounting from a most basic level.
• 25:48
  SPEAKER_02: That's the spreadsheet view, right?
• 25:50
  SPEAKER_02: Yes.
• 25:50
  SPEAKER_02: So we always keep a manual way of doing things, and everybody has to learn the manual way because what if technology fails?
• 25:57
  SPEAKER_01: Yes, and also by doing the manual way, you actually get your head around.
• 26:01
  SPEAKER_01: Yes, yes, yes.
• 26:02
  SPEAKER_02: You can actually see that.
• 26:02
  SPEAKER_02: So we have a carbon accounting team and and that they focus on that.
• 26:07
  SPEAKER_02: And then over time, we ended up building out um I what I would say is is its own sort of digital stack, uh, because it's it's a lot of different things.
• 26:16
  SPEAKER_02: There isn't and there weren't any solutions when we started down this road.
• 26:20
  SPEAKER_02: And so we built out um various collection portals that we had, and then those come up to uh, you know, a couple of data lakes, and we have a scrub that goes on top of that where we look for erroneous data, and then it goes into visualization and tableau.
• 26:37
  SPEAKER_02: And so when that happens, then our um our accounting people, our our missions accounting and our uh controllership associated with that, they get to look at that and then we go back, okay, that doesn't look right, that doesn't look right.
• 26:48
  SPEAKER_02: Um they can then compare it in a manual way if they'd like to.
• 26:52
  SPEAKER_02: Now, scope one and two is the most mature because we did that first, okay.
• 26:56
  SPEAKER_02: And that's gone through um third-party audit, so they've come in and that's under reasonable assurance every year, which is the gold standard.
• 27:04
  SPEAKER_02: Yes.
• 27:04
  SPEAKER_02: All right, and so now we have limited assurance.
• 27:07
  SPEAKER_02: We've had limited assurance over all categories that are applicable for scope three.
• 27:11
  SPEAKER_02: We have been, this is a much longer term thing, getting that through an automation or semi-automated.
• 27:17
  SPEAKER_02: It's currently semi-automated.
• 27:18
  SPEAKER_02: Okay, all right.
• 27:19
  SPEAKER_02: So um, in that instance, that CAT 11, ooh, that is really difficult.
• 27:26
  SPEAKER_02: Yes, because each product might be tweaked a different way.
• 27:29
  SPEAKER_02: And so we have to look at it from a, I would say, product group level a bit more.
• 27:34
  SPEAKER_02: And so we I think we anticipated that we would get all of that.
• 27:39
  SPEAKER_02: The final digitization of that, I want to say, is like by the middle of next year, but I asked the team to try to accelerate it because we've got a dedicated DT team that supports us.
• 27:49
  SPEAKER_02: And so uh so so I want it done sooner rather than later because we've still got to put it through the tests and and the the digital controllership because um we will have to comply with the EU um mandate for 2026.
• 28:02
  SPEAKER_02: Yes.
• 28:02
  SPEAKER_02: So that's our end game, is that that that needs to be done.
• 28:05
  SPEAKER_02: We'll have it done well in advance of that that compliance deadline.
• 28:08
  SPEAKER_01: So And you're saying, just to clarify for the audience, this is uh reporting on 2025 data in 2026.
• 28:15
  SPEAKER_01: Correct.
• 28:16
  SPEAKER_01: Yes.
• 28:16
  SPEAKER_01: Okay.
• 28:16
  SPEAKER_01: Yeah.
• 28:16
  SPEAKER_01: Yeah.
• 28:17
  SPEAKER_02: Yeah, thanks.
• 28:18
  SPEAKER_02: And so so the uh so that's that last piece.
• 28:21
  SPEAKER_02: And then and then on the fringes of all this, not just greenhouse gas emissions, we look at all of the ES and G data, and we're working on putting it all in, and and so all of our people data's been automated for a while, fully automated, and and uh we've got our principals data, we go by uh people planet principles.
• 28:41
  SPEAKER_02: All of our principals' data um comes under full assurance this year, and then it's all had controls for a couple of years, and so it's a pretty mature system.
• 28:51
  SPEAKER_02: Like we're one of the most mature companies out there.
• 28:54
  SPEAKER_01: It definitely sounds like, especially with those estimations.
• 28:56
  SPEAKER_01: So if going back to scope three is category 11, then the most complex for you.
• 29:02
  SPEAKER_02: Yes, it is, definitely.
• 29:03
  SPEAKER_01: All right.
• 29:04
  SPEAKER_01: So then I have uh I want to loop all the way back to the beginning, and then I want I do want to come back to a few things you said.
• 29:11
  SPEAKER_01: But you mentioned that when you got into this, you were only reporting scope one and scope two, and then you had to re-level set because there's this 26% difference.
• 29:21
  SPEAKER_01: Now, it's very interesting though, because then you also said scope one and scope two is basically minuscule when you look at it in in comparison to category three.
• 29:30
  SPEAKER_01: Yeah, we didn't know it then.
• 29:31
  SPEAKER_01: Yes, obviously.
• 29:32
  SPEAKER_01: Yes, that's a very good point, though.
• 29:34
  SPEAKER_01: And and actually partly related to the question I have, because what is as you were dealing with your um board and senior management of the company, this is quite a journey to go on to first say, okay, first of all, the data we've been reporting, there are issues with.
• 29:48
  SPEAKER_01: And oh, by the way, second of all, we should be reporting this other information.
• 29:53
  SPEAKER_01: And it's once you, I mean, ultimately you're gonna realize it's astronomical in comparison.
• 29:58
  SPEAKER_01: So just advice for other people or anything you can share from that journey.
• 30:03
  SPEAKER_02: So um, my advice is is just never think you have the final number.
• 30:09
  SPEAKER_02: All right, because we're always gonna discover something new.
• 30:12
  SPEAKER_02: I mean, the other aspect of is this in the educational process of everyone.
• 30:16
  SPEAKER_02: It isn't just simply the board.
• 30:17
  SPEAKER_02: Our board is fantastic, I should say.
• 30:19
  SPEAKER_02: They have come along on the journey uh along with us and watched that grow.
• 30:23
  SPEAKER_02: And I couldn't be happier with how that's that's gone.
• 30:26
  SPEAKER_02: The um my advice though is you've got to come in knowing you you're not gonna know everything.
• 30:33
  SPEAKER_02: And that you've got to manage the learning curve for yourselves as you're evolving in that process, right?
• 30:40
  SPEAKER_02: I mean, I was very realistic from the get-go, and I was like, I know this isn't exactly what we think it was.
• 30:46
  SPEAKER_02: But like, think about this.
• 30:47
  SPEAKER_02: If you're a big company like ours, you're gonna have to, you'll have mergers, acquisitions, divestitures.
• 30:53
  SPEAKER_02: You've got to go back and reset expectations every time that happens.
• 30:57
  SPEAKER_02: You have a huge sales year like we do, like we just had a great year so far, knock on wood to this point, no forward-looking statements.
• 31:04
  SPEAKER_02: Yes.
• 31:04
  SPEAKER_02: The um the and so when you look at that, your emissions go up, right?
• 31:10
  SPEAKER_02: Because you're you have more activities.
• 31:11
  SPEAKER_02: Yes, you're making more than a lot of money.
• 31:12
  SPEAKER_02: Yes, exactly.
• 31:13
  SPEAKER_02: Exactly.
• 31:14
  SPEAKER_02: At least with respect to um Cat 11 for us, right?
• 31:18
  SPEAKER_02: Because if we sold no turbines, then that's bad.
• 31:22
  SPEAKER_02: Yes.
• 31:23
  SPEAKER_02: Okay, because like we're looking for that.
• 31:24
  SPEAKER_02: Because we want to sell better turbines to displace older turbines that running efficiency.
• 31:30
  SPEAKER_02: Yes, exactly.
• 31:32
  SPEAKER_02: Which is the emission savings or avoidance in this case.
• 31:35
  SPEAKER_02: And so um, so so just note you've gotta you've gotta come in and think of this in parts.
• 31:41
  SPEAKER_02: You've got to also think about it's okay if you don't know everything.
• 31:45
  SPEAKER_02: There are gonna be times where you think, oh yeah, that not a mistake, but I would have done it a different way.
• 31:51
  SPEAKER_02: And have it have a high degree of humility, humility.
• 31:54
  SPEAKER_02: Okay.
• 31:55
  SPEAKER_02: But the other part is that transparency is your friend.
• 31:58
  SPEAKER_02: Uh that from the very beginning was the key critical issue for me is that whatever we do every step of the way, as long as you communicate about it, it is okay.
• 32:10
  SPEAKER_02: It's when people try to hide it because they're worried that it makes them look bad.
• 32:14
  SPEAKER_02: Yeah, because then because you yeah, it will make you look bad if you hide it.
• 32:18
  SPEAKER_02: Right.
• 32:18
  SPEAKER_02: Okay, but if you own it and you say, Oh, uh, you know, we didn't know.
• 32:21
  SPEAKER_02: Um, now we're smarter about how we're doing business.
• 32:24
  SPEAKER_02: Now we've gotten more people on board, we can do more.
• 32:28
  SPEAKER_02: The resource thing is a big challenge for anybody coming in.
• 32:31
  SPEAKER_01: Yeah, and well, and you reference the required reporting that you guys will have in the EU and many other companies.
• 32:38
  SPEAKER_01: And I do think this transition from voluntary to required reporting is a great time to rethink everything here.
• 32:47
  SPEAKER_01: So, yeah, that's definitely a key point.
• 32:49
  SPEAKER_01: Um, okay, a few things to come back to avoided and removed emissions.
• 32:54
  SPEAKER_01: You said it's one of your favorite topics, it's actually a topic we've been talking about.
• 32:57
  SPEAKER_01: Really?
• 32:58
  SPEAKER_01: But with that said, then just at a very high level, um, I think the point you made is one that so many people miss, which is that your sales go up.
• 33:08
  SPEAKER_01: So then your emissions went up.
• 33:09
  SPEAKER_01: But then the way to solve uh your emissions is not to reduce sales.
• 33:14
  SPEAKER_01: And it's just such a complicated thing, and especially when people just want to look at a number and say, this number is bigger.
• 33:20
  SPEAKER_01: Yeah.
• 33:21
  SPEAKER_01: Or this number is smaller, and not understand.
• 33:24
  SPEAKER_01: And so again, from I'm curious, any way you want to take this, but education or otherwise, what would you say about that?
• 33:30
  SPEAKER_02: Well, so this is why a lot of companies have not looked at absolute emissions and they look at the intensity around products, because that way they're showing that they're they're reducing emissions as their product sales go up.
• 33:44
  SPEAKER_02: Well, that's one of the things that we introduced this year.
• 33:47
  SPEAKER_02: Like I have very strenuously been against us going to intensity.
• 33:52
  SPEAKER_02: Yes, I have uh um I'm opposed to intensity.
• 33:55
  SPEAKER_02: Yeah.
• 33:55
  SPEAKER_02: I've strenuously like I but this year I said, you know what, this is the year we're gonna start to show that because uh I wanted people to see, because I knew that on an absolute basis, we had seriously reduced emissions.
• 34:10
  SPEAKER_02: Okay, but there's there are a couple of headwinds that you face uh right now in the world, and I can talk to talk to those in a minute.
• 34:17
  SPEAKER_02: But one of the major ones is around that, you know, we we sold more of certain things.
• 34:23
  SPEAKER_02: We can't control what people buy.
• 34:24
  SPEAKER_02: We can certainly steer them in the right direction.
• 34:27
  SPEAKER_02: But around the things that they bought, did it displace something that was worse?
• 34:31
  SPEAKER_02: The answer is yes.
• 34:32
  SPEAKER_02: So we haven't started to include the saved, avoided, removed emissions, but we're working towards that as sort of think about it as gap, non-gap.
• 34:40
  SPEAKER_02: We'll have that non-gap right for greenhouse gas protocol.
• 34:44
  SPEAKER_02: I gotta put a little star up there because when I sat down with the EU regulator and said, Are you gonna accept gap and non-gap?
• 34:51
  SPEAKER_02: They said no.
• 34:52
  SPEAKER_02: And I'm like, Well, you're over here in Brussels.
• 34:55
  SPEAKER_02: Okay, let's see what the countries do.
• 34:57
  SPEAKER_01: Yeah.
• 34:57
  SPEAKER_02: Because that's a whole different thing, right?
• 35:00
  SPEAKER_02: So when we we brought in the intensity piece, that was how we could show that we'd actually done a pretty serious reduction, right?
• 35:10
  SPEAKER_02: Okay, so um, I put a pin in on on uh headwind.
• 35:14
  SPEAKER_02: One of the other things to think about is that as the world energy mix has changed rather considerably around the rerouting of energy in Ukraine, even though a lot of people don't talk about it as much, it's still really important because the IEA is a lot of the emissions factors that people use.
• 35:30
  SPEAKER_02: We do.
• 35:30
  SPEAKER_02: There's about a two-year lag, right?
• 35:33
  SPEAKER_02: And so we got burned by the two-year lag last year.
• 35:37
  SPEAKER_02: And so you see at our 2023 numbers, where we we had like seriously reduced our emissions, but because that was reflecting a more coal-dominated dark grid, everybody who uses those emissions factors will have gotten a headwind.
• 35:52
  SPEAKER_01: Yeah, this is quite such a challenge.
• 35:54
  SPEAKER_01: Yes, yeah, and again, where a lot of people don't understand the impact of some of these different things.
• 36:00
  SPEAKER_01: So it's hard to explain.
• 36:01
  SPEAKER_02: It is, and this is a part of that transparency.
• 36:03
  SPEAKER_02: So I had to come in and say, hey guys, looks like we're flat.
• 36:07
  SPEAKER_02: Our carbon out program, we do a separate accounting over here just to show that math.
• 36:12
  SPEAKER_02: We did the things, okay?
• 36:14
  SPEAKER_02: This is headwind, right?
• 36:16
  SPEAKER_02: Also, our activity went up.
• 36:17
  SPEAKER_02: And so those two things were our major headwinds.
• 36:20
  SPEAKER_02: And so we'll expect to see you know a tailwind soon as that rebalances.
• 36:25
  SPEAKER_02: Oh, yes.
• 36:26
  SPEAKER_02: And then you have to explain that.
• 36:27
  SPEAKER_02: Exactly.
• 36:28
  SPEAKER_02: And they'll be like, Why just happened?
• 36:29
  SPEAKER_02: Yeah, yeah, now we're all catching up.
• 36:31
  SPEAKER_02: Some people have said, well, should we then readjust and put that in the proper year later?
• 36:36
  SPEAKER_02: And I'm like, no.
• 36:37
  SPEAKER_02: No, that's too complicated.
• 36:38
  SPEAKER_02: That is so messy.
• 36:39
  SPEAKER_02: Yeah, it's way too complicated.
• 36:41
  SPEAKER_02: That is ridiculous.
• 36:42
  SPEAKER_02: Yeah.
• 36:42
  SPEAKER_02: So so getting us, so how does this relate to saved, avoided, and remote emissions?
• 36:45
  SPEAKER_02: All right.
• 36:46
  SPEAKER_02: So this is an area, as I brought up the sort of gap, non-gap piece, where I think it's really important that everybody acknowledge that the greenhouse gas protocol didn't get that piece done because it was fraught and they were doing consensus-driven work.
• 37:01
  SPEAKER_02: Okay.
• 37:02
  SPEAKER_02: It's fraught because, you know, some people would say, well, if it's an energy transition, we got to phase that out, period.
• 37:10
  SPEAKER_02: We shouldn't say make it slightly less bad.
• 37:12
  SPEAKER_02: Okay.
• 37:13
  SPEAKER_02: But if it's an actual transition, you've got to transition, not jump off a cliff.
• 37:17
  SPEAKER_02: Right.
• 37:18
  SPEAKER_02: Okay.
• 37:19
  SPEAKER_02: Uh, because that's bad for the global economy.
• 37:22
  SPEAKER_02: If you do anything that, like, look at the invasion of Ukraine.
• 37:25
  SPEAKER_02: That was bad for the big part of the economy.
• 37:28
  SPEAKER_02: Any sudden moves create ripple effects.
• 37:32
  SPEAKER_01: Right.
• 37:33
  SPEAKER_01: I mean, that's the same reason you have to be practical about the role of a gas power plant.
• 37:37
  SPEAKER_01: That's exactly right.
• 37:38
  SPEAKER_02: That's exactly right.
• 37:39
  SPEAKER_02: And so um today, we'd like to see the greenhouse gas protocol take that up.
• 37:47
  SPEAKER_02: That was a part of what they put out when when they were asking for comments, et cetera.
• 37:51
  SPEAKER_02: And so um, so we try to engage with with the GHGP, but they're pretty underwater, quite frankly.
• 37:58
  SPEAKER_02: And at first we were like, What?
• 37:59
  SPEAKER_02: They don't want to talk to us.
• 38:00
  SPEAKER_02: No, no, that's not the case.
• 38:01
  SPEAKER_02: I think they're just completely underwater.
• 38:03
  SPEAKER_02: Yes.
• 38:04
  SPEAKER_02: Okay.
• 38:04
  SPEAKER_02: Yes.
• 38:05
  SPEAKER_02: And so uh, so because they're great earnest people and we're fully supportive, because we like go to the 99.9% compliance and the little bit that we don't comply, and I'll tell you about.
• 38:16
  SPEAKER_02: The um, so we sat down and said, hey, okay, if they're underwater, how can we look at driving consensus around saved, avoided, removed emissions?
• 38:28
  SPEAKER_02: So we found a third-party NGO and said, Would you consider hosting this and working with the greenhouse gas protocol?
• 38:36
  SPEAKER_02: Because they don't have the bandwidth, but you do.
• 38:38
  SPEAKER_02: And so we have this great um group that we have worked with, and it has, I can't name all the companies that are in it because I'm not in it from day to day.
• 38:46
  SPEAKER_02: Some people on my staff.
• 38:47
  SPEAKER_02: And this is a group that actually has um has over time worked with WRI, so the World Resource Institute, which is a big part of the greenhouse gas protocol, and members of the Greenhouse Gas Protocol.
• 38:57
  SPEAKER_02: So they they took that up and they have been um hosting this cross-sectoral working group to look at how do we get to consensus around how to account for saved, avoided, and removed emissions.
• 39:09
  SPEAKER_02: Why is this important?
• 39:11
  SPEAKER_02: It's important because if we think the world goes to net zero, it only gets there with removals.
• 39:18
  SPEAKER_02: Okay.
• 39:19
  SPEAKER_02: So CCS is not, you can't use that system under the greenhouse gas protocol today.
• 39:25
  SPEAKER_02: It's just not in there.
• 39:26
  SPEAKER_02: Right.
• 39:27
  SPEAKER_02: And if so much of the world in like the real sort of panacea land is can you capture CO2 from the atmosphere and put it in put it into a lock state, that's your end game.
• 39:37
  SPEAKER_01: If you can't use that in the protocol, we're we're hopefully the protocol will be updated.
• 39:43
  SPEAKER_01: But yes.
• 39:44
  SPEAKER_02: Well, so that's what we're trying to drive at.
• 39:45
  SPEAKER_02: Yeah.
• 39:46
  SPEAKER_02: And so so for us, because we're selling, you know, um the full value chain of CCS, this becomes very material to our business.
• 39:55
  SPEAKER_02: Because if you look at a part of the CCS system, it's gonna be a missive.
• 40:00
  SPEAKER_03: Because you because you had to make something.
• 40:01
  SPEAKER_03: Apparently, yes.
• 40:02
  SPEAKER_02: Yeah.
• 40:03
  SPEAKER_02: Okay.
• 40:04
  SPEAKER_02: But if you look at then the system and you can account for a removal of the amount that it generates at the end.
• 40:12
  SPEAKER_02: Yes, then suddenly you have your net zero position.
• 40:15
  SPEAKER_02: That's legitimate because you're actually taking CO2 out of the air.
• 40:18
  SPEAKER_02: So we want to see that shift then from like we can still report on a sold product basis.
• 40:24
  SPEAKER_02: However, if you've got a removal on the back end that you want to take it into account, it should be in there.
• 40:30
  SPEAKER_02: Okay.
• 40:30
  SPEAKER_02: I would also make the case that if you're selling, like like we sell equipment in like the same piece of equipment into geothermal to CO2 and for oil and gas.
• 40:41
  SPEAKER_01: Yeah.
• 40:41
  SPEAKER_01: And for the benefit of our listeners, geothermal then would not have emissions from that gas, would have a middle amount, and then coal would have depending on the application.
• 40:51
  SPEAKER_01: Yeah, yeah.
• 40:51
  SPEAKER_02: Depending on the application.
• 40:52
  SPEAKER_02: And so that really matters.
• 40:54
  SPEAKER_02: And so you can take that into account for the sold product right now.
• 40:58
  SPEAKER_02: However, can't do it for removal.
• 41:01
  SPEAKER_02: Okay.
• 41:02
  SPEAKER_02: And also with the saved avoided piece.
• 41:05
  SPEAKER_02: So one area that we've done a great job is when customers come back and say, hey, we have this, but what do you have that would allow me to have that fuel switching?
• 41:16
  SPEAKER_02: Okay.
• 41:18
  SPEAKER_02: We have this, we've been developing this, we've been waiting for this moment.
• 41:21
  SPEAKER_02: Okay.
• 41:21
  SPEAKER_02: And so we steer them towards that next thing.
• 41:25
  SPEAKER_02: That results in a huge emission savings that nobody gets credit for.
• 41:30
  SPEAKER_02: Ultimately, they'll get it because they'll produce less, but if it's an expansion, it's greenfield, then everybody gets dinged.
• 41:38
  SPEAKER_01: Yes.
• 41:39
  SPEAKER_02: If it's a replacement in a brown field, they get a benefit.
• 41:42
  SPEAKER_02: So why shouldn't we get a benefit?
• 41:44
  SPEAKER_01: Yeah.
• 41:44
  SPEAKER_01: I mean, there's this very complicated topic.
• 41:47
  SPEAKER_01: And definitely to your point, I think uh worthy of a separate podcast to talk about.
• 41:52
  SPEAKER_01: I actually am gonna loop back to something that you and I both said we objected to.
• 41:57
  SPEAKER_01: And for many of our listeners, they're probably thinking, what, what?
• 42:00
  SPEAKER_01: So intensity metrics.
• 42:01
  SPEAKER_01: So I know you said you're gonna start to use them, you explain why.
• 42:04
  SPEAKER_01: Yeah.
• 42:04
  SPEAKER_01: But can you explain your sort of overall reluctance of why you didn't want to use them?
• 42:10
  SPEAKER_02: Yeah.
• 42:11
  SPEAKER_02: So when people just report on intensity, uh, they don't necessarily show what their actuals are.
• 42:18
  SPEAKER_02: And I think that's really important.
• 42:20
  SPEAKER_02: So if your actuals were like tiny, because there are some companies that have a tiny bit of emissions, but if they have tiny emissions, it's actually way harder if you have tiny emissions to get rid of that, right?
• 42:30
  SPEAKER_02: So maybe they show intensity.
• 42:31
  SPEAKER_02: So people wouldn't know though that their top line, they're kind of irrelevant, right?
• 42:37
  SPEAKER_02: Like they're not the people you should spend the money on trying to evade.
• 42:40
  SPEAKER_02: But for a big company, and I'm not gonna, I'm not gonna call out any given sector.
• 42:44
  SPEAKER_02: Yes.
• 42:44
  SPEAKER_02: Okay.
• 42:45
  SPEAKER_02: Uh, but I would say for the more intensive sectors, if they want to not show that their emissions for their company is greater than, say, the economies of Texas and California, they can just put the number up for intensity.
• 43:01
  SPEAKER_02: And I didn't want, knowing out of the starting block that we were going to have some adjustments to how we were accounting, I didn't want it to be hidden.
• 43:10
  SPEAKER_02: I wanted to make sure that it was really obvious what we were doing.
• 43:13
  SPEAKER_02: Yes.
• 43:13
  SPEAKER_02: And that our data could be trusted.
• 43:15
  SPEAKER_02: Yeah.
• 43:16
  SPEAKER_02: And so there's no smoke and mirrors.
• 43:18
  SPEAKER_02: It just is what it is.
• 43:19
  SPEAKER_02: And when we've had to make adjustments, we've certainly had moments in time where we came back and said, Oh, nuts.
• 43:25
  SPEAKER_02: We've got to go back and fix that.
• 43:26
  SPEAKER_02: And then we're not feeling it's not a good feeling, but then in in our statements and notes, you can clearly see that we changed the model assumption, or it was a difference in the emissions factors, or whatever it is, or a new method, right?
• 43:38
  SPEAKER_02: So um me at a personal level, uh, I'm a so I'm taking off my bakery.
• 43:46
  SPEAKER_02: Yes.
• 43:46
  SPEAKER_02: I'm an avid sustainability person.
• 43:50
  SPEAKER_02: And so I want to know what the numbers are.
• 43:53
  SPEAKER_02: Okay.
• 43:53
  SPEAKER_02: And so so just to to talk about the street cred, I have used shoes on, okay.
• 44:00
  SPEAKER_02: I have a used dress on.
• 44:02
  SPEAKER_02: Most of what I purchase, I research the company's supply chain.
• 44:06
  SPEAKER_02: I look at what they disclose.
• 44:08
  SPEAKER_02: Like I'm a very educated consumer.
• 44:10
  SPEAKER_02: I can't always do it.
• 44:11
  SPEAKER_02: But I want to know.
• 44:12
  SPEAKER_01: But you can reduce that too.
• 44:13
  SPEAKER_01: I can.
• 44:14
  SPEAKER_02: Yeah.
• 44:14
  SPEAKER_02: I can.
• 44:15
  SPEAKER_02: And so when people put up in in the intensity and I don't know how much it is to begin with, I don't buy from them as a person.
• 44:23
  SPEAKER_02: And so like I want people to have that confidence in us too.
• 44:26
  SPEAKER_01: Yeah.
• 44:27
  SPEAKER_01: That I mean that's a great story.
• 44:28
  SPEAKER_01: And thank you for sharing that.
• 44:30
  SPEAKER_01: And and I think as well, just very simplistically, um, again, for our users' benefit, if you just think if you have a company, you sent sold 10 units and you had a hundred, you know, um, emissions CO2E, and then now you raise the price, well, now your emissions are going to go down from an intensity point of view, even though nothing has actually changed.
• 44:51
  SPEAKER_01: And that's right, fundamentally has been for me, again, it's just much more simplistic, even than what you're saying.
• 44:58
  SPEAKER_01: But that has just been a hang up because nothing changed other than your prices went up, and yet your intensity can go down.
• 45:05
  SPEAKER_02: Yeah, yeah.
• 45:05
  SPEAKER_02: And the pricing thing is somewhat fraught anyway, because you know, it's harder to disclose that number for heavy industrials because we don't publish the price of a turbine.
• 45:17
  SPEAKER_02: Yes, yes.
• 45:19
  SPEAKER_01: Oh, yeah.
• 45:20
  SPEAKER_01: So then because so, oh yes, I had not thought about it at that detail of a level.
• 45:25
  SPEAKER_02: And so the um like that was just not even a I there are other ways that you could get into it.
• 45:32
  SPEAKER_02: Yes, get into it.
• 45:32
  SPEAKER_02: Yes, it's aggregated, et cetera.
• 45:35
  SPEAKER_02: But uh, you know, this is a much cleaner way, the way we're doing it today.
• 45:40
  SPEAKER_01: All right.
• 45:40
  SPEAKER_01: I have actually many, many questions for you.
• 45:43
  SPEAKER_01: Let me just do a couple more.
• 45:45
  SPEAKER_01: Um, one of the points we we briefly touched on, but I want to go back to is just talking about working with other stakeholders in your company.
• 45:53
  SPEAKER_01: So obviously, again, rock the boat in a lot of ways, it sounds like.
• 45:57
  SPEAKER_01: It sounds like you've had a lot of support in doing that, but how has that been then working with the accountants and the board and IT and all the other groups that you've needed to bring along with you?
• 46:08
  SPEAKER_02: You know, um I've been I've been with a company about about five years.
• 46:14
  SPEAKER_02: Feels so much longer.
• 46:15
  unknown: Nice.
• 46:16
  SPEAKER_02: Hopefully in a good way.
• 46:17
  SPEAKER_02: In a good way, because for a while, it like when you're working on transformation of anything, there's like this excitement at the front end, and then there's like a huge plateau where it feels like you're like you're on a treadmill and someone's got a water hose like pounding, it's pounding it, like you're gonna do it.
• 46:35
  SPEAKER_02: Yeah, and you're not getting anywhere.
• 46:37
  SPEAKER_02: Yeah, and like you have this, like there's like always this like dark period somewhere in there.
• 46:42
  SPEAKER_02: And then one day you wake up and you're like, oh my Lord, look at our accomplishments, right?
• 46:49
  SPEAKER_02: And so once you hit that accomplishment period, it's actually hard to imagine that there was ever a time that you're on that treadmill and like getting inundated every day.
• 46:58
  SPEAKER_02: So um I would say that there are punctuations in time, right?
• 47:03
  SPEAKER_02: But where we were five years ago um was we were uh what I would say is like an old company being reborn, right?
• 47:11
  SPEAKER_02: A lot of our leadership has has turned, you know, like we've they moved on to new things and and we have different, totally different, you know, ELT comp, you know, executive leadership uh composition.
• 47:24
  SPEAKER_02: The role of sustainability, just to give people a worldview.
• 47:27
  SPEAKER_02: Like I came in from the beginning and to just like just ponder this progression.
• 47:32
  SPEAKER_02: I came in under marketing and technology.
• 47:35
  unknown: Okay.
• 47:36
  SPEAKER_02: And so our CSR back then was done by the more marketing.
• 47:41
  SPEAKER_01: A lot of companies are still there.
• 47:42
  SPEAKER_02: They're still there.
• 47:43
  SPEAKER_02: Yeah.
• 47:43
  SPEAKER_02: Okay.
• 47:44
  SPEAKER_02: So then I moved over into strategy and business development.
• 47:49
  SPEAKER_02: And that was right because we were developing our strategy as a company and with our sustainability strategy.
• 47:56
  SPEAKER_02: And then over time, I moved out and moved into finance, and it was right at that time where we started building in controls and controllership and raising the bar on our um our auditing.
• 48:08
  SPEAKER_02: And then ultimately um we then when that was more mature, our function then moved and is coupled with operations.
• 48:15
  SPEAKER_02: So that allows us to oh yeah, really impact up into the supply chain, day-to-day operations, et cetera.
• 48:23
  SPEAKER_02: So think about that.
• 48:25
  SPEAKER_02: Messaging over to being really strategic, putting on the data fidelity and controls, like, is it legit?
• 48:34
  SPEAKER_02: And ends up with now, let's let's run.
• 48:37
  SPEAKER_02: Let's change things.
• 48:38
  SPEAKER_02: Let's do it.
• 48:38
  SPEAKER_01: Yeah.
• 48:39
  SPEAKER_02: Okay.
• 48:40
  SPEAKER_02: Ad gets me so excited.
• 48:42
  SPEAKER_02: Yeah, so you make it sound so easy, and I'm sure it was not.
• 48:46
  SPEAKER_02: It was painful.
• 48:47
  SPEAKER_02: The the time, every time, and like I have some colleagues who I would call my, you know, everyone has their ledge buddies.
• 48:53
  SPEAKER_02: Yes.
• 48:54
  SPEAKER_02: And uh, and so they they'll probably hear this and and chuckle a little bit because they call me like, oh my god, my function, we're moving again.
• 49:01
  SPEAKER_02: Yes, yes.
• 49:02
  SPEAKER_02: And there were those moments, but like I will tell you, the the moment I felt like the biggest achievement happened was when we moved into finance.
• 49:12
  SPEAKER_02: Because suddenly, like, there was real credibility there.
• 49:16
  SPEAKER_02: There, we finally started to have a bit of a budget because I was like a black hole over there.
• 49:23
  SPEAKER_02: Okay.
• 49:23
  SPEAKER_02: And people would say, Do you have 10 people or do you have two people?
• 49:26
  SPEAKER_02: And we're like, no one knows, right?
• 49:28
  SPEAKER_02: Okay, so by the time we land in finance, suddenly everything's getting very real and there's a lot more accountability.
• 49:34
  SPEAKER_02: And and then from from that moment on, the ability to really transform things just took off.
• 49:40
  SPEAKER_01: Yeah.
• 49:41
  SPEAKER_01: Well, and our audience is many finance people, so I'm sure they will appreciate your comment about it.
• 49:46
  SPEAKER_02: I did have mixed feelings about coming out of finance.
• 49:48
  SPEAKER_02: I was like, man, we're just getting our groove on over here.
• 49:50
  SPEAKER_02: Yeah.
• 49:50
  SPEAKER_02: But just because we keep working with them.
• 49:52
  SPEAKER_02: That's absolutely right.
• 49:53
  SPEAKER_02: I mean, like our our head controller, uh, her name is Rebecca, and she's the amazing woman, and she's come in and really foundationally shook up our the way we control information.
• 50:04
  SPEAKER_02: And we have a great partnership together.
• 50:06
  unknown: Yeah.
• 50:07
  SPEAKER_01: Well, that's like what everyone should be aspiring to.
• 50:09
  SPEAKER_01: Yeah.
• 50:10
  SPEAKER_01: So to that point of aspiring, I think you've given uh our listeners a lot to think about today and a lot to aspire to.
• 50:17
  SPEAKER_01: But what would some final words of wisdom be then?
• 50:21
  SPEAKER_02: You know, don't get stuck in the dark times, right?
• 50:25
  SPEAKER_02: Because don't get stuck.
• 50:27
  SPEAKER_02: And always have somebody that you can call.
• 50:29
  SPEAKER_02: And you know what?
• 50:29
  SPEAKER_02: And if you're in this, you can call me.
• 50:32
  SPEAKER_02: Because like you might be getting a lot of focus.
• 50:34
  SPEAKER_02: Because I guarantee at some point we probably dealt with this.
• 50:37
  SPEAKER_02: Okay.
• 50:38
  SPEAKER_02: You know, I I sometimes, because I'm a hyperachiever and I want us to be like you know, wait.
• 50:44
  SPEAKER_02: Already 10 years from the year.
• 50:45
  SPEAKER_02: Yeah, I do, I do.
• 50:46
  SPEAKER_02: Because this is a big part of why I was hired was to uh give this life to differentiate, right?
• 50:52
  SPEAKER_02: Uh and so so uh my expectations are high.
• 50:56
  SPEAKER_02: Um but go in knowing, expect reality is it's messy, but you're gonna find that you're gonna have a lot more support than you realize.
• 51:05
  SPEAKER_02: You've got to think about what is it, what is change management and transformation around this look like?
• 51:11
  SPEAKER_02: It means that some days you're gonna have to stick with the old way for a while.
• 51:16
  SPEAKER_02: But if you pick one or two priorities, you really do those well.
• 51:21
  SPEAKER_02: Okay, for me, for a while, it was making sure the numbers were right.
• 51:26
  SPEAKER_02: It was actually more important that we had that baseline together than the abatement itself.
• 51:32
  SPEAKER_02: Right.
• 51:33
  SPEAKER_02: Yeah, because you have to know where you're starting.
• 51:34
  SPEAKER_02: You do, you do.
• 51:35
  SPEAKER_02: And now we feel pretty confident about that.
• 51:37
  SPEAKER_02: Uh, but then every year we make an adjustment.
• 51:39
  SPEAKER_02: Yeah, you think of something else.
• 51:40
  SPEAKER_01: Okay, but that's but that's the journey.
• 51:42
  SPEAKER_01: That's a part of the journey.
• 51:43
  SPEAKER_02: And so, like, don't stay in the dark place too long.
• 51:46
  SPEAKER_02: Um, there's always somebody who's probably further back than you are in the journey, all right?
• 51:50
  SPEAKER_02: And everybody's figuring this out for the first time.
• 51:53
  SPEAKER_02: I mean, never in the history of the world have we tried to subtract energy from the energy system.
• 52:00
  SPEAKER_02: Never have we tried to transition away from carbon.
• 52:05
  SPEAKER_02: That's amazing.
• 52:07
  SPEAKER_01: Which is been, yeah.
• 52:07
  SPEAKER_02: Yeah.
• 52:08
  SPEAKER_02: I mean, if you think about the power mix, um I can't name a form of energy generation that we still don't use.
• 52:16
  SPEAKER_02: People still burn dung.
• 52:18
  SPEAKER_02: When the power goes out, we resort to fireplaces and candles, pellet stoves in some places.
• 52:24
  SPEAKER_01: Yeah.
• 52:25
  SPEAKER_02: Right?
• 52:26
  SPEAKER_02: Yeah.
• 52:26
  SPEAKER_02: Okay.
• 52:27
  SPEAKER_02: So what we're trying to do in accounting for a waste molecule and then trying to reduce that is pretty phenomenal.
• 52:35
  SPEAKER_02: So anybody working in this space, hats off.
• 52:38
  SPEAKER_01: All right.
• 52:38
  SPEAKER_01: Well, that is definitely an inspiring note to end on.
• 52:41
  SPEAKER_01: So it was such a pleasure.
• 52:43
  SPEAKER_01: Uh, thanks so much for joining me today.
• 52:45
  SPEAKER_01: Thanks for having me.
• 52:47
  SPEAKER_01: That's our show for today.
• 52:49
  SPEAKER_01: Tune in next week for more fresh episodes.
• 52:52
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• 52:55
  SPEAKER_01: Follow the PWC Accounting Podcast wherever you listen to your podcasts.
• 52:59
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• 53:09
  SPEAKER_01: From Thought Leadership at PWC, I'm Heather Horn.
• 53:13
  SPEAKER_01: Thanks for tuning in.
• 53:20
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• 53:24
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