It’s a common misconception that sustainability and ESG are only about risk mitigation.
In reality, they’re also about value creation.
Today’s guests, Abby Davidson, Vice President, North America at Corporate Citizenship, and Carol Casazza Herman, Managing Director at Casazza Herman LLC, explain why as they join the show to share all you need to know about sustainability and ESG.
– The meanings of sustainability and ESG
– Why sustainability and ESG are smart business practices
– How to take steps to improve sustainability and ESG in your business
Are you ready to start your digital transformation journey? Request a demo today.
Check out the full episode below:
[00:00:01] Josh Santo: Welcome to Conquering Chaos, the show for manufacturing leaders. In each episode, we are connecting you to the manufacturing leaders of today who are driving the innovations needed to future-proof the operations of tomorrow. If you feel your time is spent fighting fires and trying to control the everyday chaos, this show is the show for you. My name is Josh Santo, I’ll be your host.
Welcome to the show. Today, we have a special episode. We’re joined by not one, but two guests, who are experts in the field of Environment, Health, Safety, and Sustainability. Now, both of our guests are accomplished in their own right. We were introduced to their efforts at Corporate Citizenship, which is on a mission to harness the power of business to create a better future for everyone. Please welcome to the show, Abby Davidson and Carol Casazza Herman. Thank you so much for being here today.
[00:00:56] Carol Casazza Herman: Thanks for having us.
[00:00:57] Abby Davidson: Thank you so much, Josh. It’s a pleasure.
[00:00:59] Josh: It is. It is a pleasure. I’ve really enjoyed the conversations we’ve had before the show. I will admit that I am still pretty novice when it comes to really understanding some of these topics that we’re going to explore today, so I’m really looking forward to learning from both of you. Before we get into the topics that we’re preparing to discuss, I’d really like to just introduce you to our listeners. Would you mind just sharing some information about yourselves?
[00:01:24] Abby: Absolutely. Thanks, Josh. I’m Abby Davidson. I lead Corporate Citizenship’s North America business. As you mentioned, Corporate Citizenship has worked for more than 23 years solely in the field of responsible and sustainable business. We’re a strategy consulting firm and we work to drive change with our clients to create a more just and equitable and sustainable future for everyone.
[00:01:46] Carol: This is Carol Casazza Herman. I’m a senior adviser with Corporate Citizenship, a long-time Environmental, Health and Safety, and Sustainability practitioner.
[00:01:58] Josh: All right. There is a wealth of experiences and it sounds like, correct me if I’m wrong, but both of you, while working towards the same goal, you do have different backgrounds as far as how you got here. Carol, for example, I know that you have a lot of experience directly in manufacturing as well. I’m very interested in these viewpoints of how people come to some of the same conclusions and movements while having these different backgrounds.
I’m really looking forward to digging into, also, Abby, what you said, which is that idea of just and equitable for everyone. Those are some pretty powerful words. Before I get too far ahead of myself, I’d like for us to level set a little bit. Now, overall, this episode, we’re going to be talking about sustainability. Topics on sustainability aren’t new, though it does seem to be an area of focus for many companies, especially here, recently. When I go to a lot of the websites of the customers that we here at Parsable seek to serve, I see a very prominent focus on, “Here is what we’re doing with regard to sustainability.”
Now, it’s not just manufacturing, right? There are tech companies that are often in the news, publicizing the impact that they’re making to reduce their carbon footprint, for example. There are consulting firms who are organizing initiatives to promote and drive corporate social responsibility, which is referred to as CSR. Then, there’s environmental social governance, known as ESG. I want to get real basic for the listeners. What are these terms, what are they referring to, and how do we see their impact as consumers?
[00:03:47] Abby: Josh, let’s really simplify this for a second because there’s a lot of terminology in this space and it reflects the evolution of the field over the past two-plus decades. Really, sustainability is simply a smart lens on your business strategy. Sustainability is smart business. It’s thinking about the environmental, social, and governance-related risks and opportunities that are material to your business, and defining short and longer-term strategies to deliver value, taking those into consideration. That’s relevant to every industry from manufacturing, technology, healthcare, financial services, et cetera.
[00:04:25] Carol: I like to think of sustainability as this blanket term, and environmental, social, and governance are the three pillars which support that term. When you talk about ESG, you really get to focus on specific impacts to the environment or using environmental capital-like resources and raw materials. The social is really about your workforce impacts to the community and impacts from the products one puts on the market. Then, the governance is really all about internal controls that are used by a company to mitigate risk. This concept of sustainability, as Abby said, is really this broad lens, and it all adds up to trying to develop a company that sustains itself into the future.
[00:05:31] Josh: Okay. It’s not that these are separate or independent approaches. There’s really one core cause and the way that you drive towards making improvements to that cause are through ESG, CSR. Those are both serving sustainability so that we shouldn’t see them as separate instances.
[00:05:57] Abby: Yes. Josh, I don’t know if I’d call it a cause, but it’s really about value creation. It’s about how businesses create value for a company and, increasingly, the concept of the company is broadening to a broader array of stakeholders, investors, customers, suppliers, consumers. Thinking about the company as a whole and how the company delivers value, and then, yes, looking holistically across the specific environmental, social, and governance issues that Carol had mentioned, and they are interconnected. There are also specific ways that you can pull out of focus on particular issues like water management, for example, or workers’ safety, and address those specifically and take action accordingly.
[00:06:43] Carol: I want to pull out something from what Abby just said. One of the misconceptions about sustainability in ESG is that it’s very risk-based, it’s only about risk mitigation, and one shouldn’t miss the importance of the point that there’s an opportunity side. There’s a plus side to sustainability in ESG, and that’s about value creation. I think that, over time, companies have been a bit slower to pick up on that. They really have been focused on the risk side, but some of the obvious examples of the value side is new markets that are created, finding new sets of customers that are interested in less environmentally burdensome product, or a product that is made in a supply chain that’s free from social impacts like child labor and poor labor practices. There’s a lot of upside to this, and I’m really excited because I think we’ve reached the tipping point, and there is so much more focus on the plus side.
[00:08:07] Josh: These are both interesting points. They get into something that I was eager to address with you, which is misconceptions. I feel like I just learned something, a perspective that I didn’t have before. When I thought of sustainability, I thought about it separate from the company’s side, more so as it is a duty, it’s an obligation, almost a chore that you have to do to serve and better society.
The perspective that you just shared with me is that it’s not that it should be seen as, “You have to do these things because it’s right.” It’s, “You should do these things because there’s value both for you as an organization, as a company, and the people that you seek to serve.” That’s the perspective that I didn’t have before.
[00:08:54] Abby: Absolutely, Josh. The misconception is that sustainability is mainly about risk management. Another one is what you just brought up, Josh, which is that it’s separate and it’s about maybe philanthropy and something that has nothing to do with core business. 20 years ago, that was more common practice for companies, but if you start to look at how companies run good businesses, companies are always thinking, to some degree, about the environmental resources they’re using and the impacts that they are creating on communities and so forth.
Thinking about the value creation angle, it’s coming from a variety of stakeholders right now. As Carol said, we’re moving toward a tipping point. We saw during COVID, for example, that ESG investment funds performed better than their sister counterparts. We saw that evidence from Morningstar and from S&P Global. That was the first evidence that we saw that confirmed what we had suspected for a long time, which is that ESG funds would be more resilient in a crisis. We also have seen evidence, even during COVID, that consumer preferences for sustainable products, as Carol was saying, that claim to be more environmentally sustainable or made without labor risks are preferable. The consumer preferences went up, demand for those products went up. We’ve seen some studies there.
Then there’s been data for a long time that shows that talent, especially millennials and Gen Z, want value alignment with the companies with whom they work. There’s some evidence that millennials won’t take a job if it doesn’t align with their values, and that starts to quickly move toward sustainability and making sure that a company is addressing key aspects of ES and G. There are a variety of reasons to address sustainability and a number of areas that can drive the upside as well as manage risks.
[00:10:45] Josh: Now that’s a great point because that gets into the ideas that we wanted to explore here in particular. It’s not enough to understand what it is, and how you can look at it, and what it can bring you, but this idea of why you need to pay attention and do something about it right now. There’s a lot going on in the world. There’s climate change and the impact that that’s having on ecosystems. There’s social unrest. There’s a pandemic that’s still in play. On top of that, exactly what you brought up, Abby, which is manufacturing, as an industry, is facing multiple threats. You’ve got the retiring workforce and you’ve got labor and skills shortages. You’ve got a change in consumer demands and a change in worker demands. Like you mentioned, millennials, Gen Z, a lot of studies and indications show that they want to work for something that’s more in line with their values, as opposed to something that represents something that they don’t feel as morally good about.
There are clearly a lot of pressures. I think one of the things that we could really get into is how prioritizing sustainability helps across the board on both sides. You started to allude to that. One of the conversations we’re having a lot is, “How do you attract and retain the younger generation in manufacturing?” I think that’s a good example of where to start out. How does sustainability play a role in getting people to just fill some of these positions?
[00:12:18] Carol: Folks today want to work for a company with a larger purpose. They’re not just interested in the job at hand. They want to feel like they’re part of a greater good. Even if one is in the manufacturing line where that work is connected to the overarching goals of the company to be more sustainable, to be more equitable, to observe the right things in how it governs itself, that really is very satisfying. That helps a company retain talent, it helps a company attract talent, and there’s a feeling that you’re more than just the job in front of you. You’re part of a larger team and a larger purpose.
[00:13:08] Abby: Absolutely. We worked with a number of manufacturing companies, as you might imagine, across corporate citizenship. I’m thinking of one in particular, where we did a materiality assessment, which is the sustainability strategy process to prioritize the most important ESG-related issues. Part of that included a survey, and we surveyed the workforce, including everybody on the plant floor, et cetera. We ended up with over 1,000 responses from workers who were at the plant level. That was really a much higher response rate than we had expected. It showed the incredible interest in values alignment that workers have at any age in this company. Like every manufacturing company, they were facing the pressures we were just talking about, which is a retiring workforce and figuring out how you attract and retain the future workforce to do this work going forward.
[00:14:02] Josh: Some of the problem is not just doing something because you want people to take the steps that they need to live up to these principles. It’s also getting the word out that this is the way you operate, this is what you’re doing. We’re also seeing that there’s a lot of difficulties just in the marketing of manufacturing. Not marketing to consumers, but marketing to the people that you need to bring in, the millennials and the Generation Z. This is a topic that I love really digging into, but it’s not the only thing. Prior to recording this, some of the aspects that we talked about of how sustainability really plays a part in the value creation or in some of these risks that we have just in society, one of the things that came up that I thought was interesting, something that I hadn’t put together was how climate change is impacting business and supply chain. Can you take some time to talk to us about that impact that climate change is having on manufacturing in that regard?
[00:15:03] Abby: Absolutely. I’ll start and Carol can build on this. Supply chain we saw it– First of all, climate change creates uncertainty. It creates a frequency of increasing natural disasters and increasing operational risks and uncertainty about when and where those risks are going to take place. In the short term, there can be acute shocks like natural disasters that interrupt supply. We also saw it with a pandemic last year, where supply was significantly interrupted. That’s calling to question companies thinking about where we locate our supply base, and how we equip our suppliers to take steps to mitigate and adapt to climate change. One more point on that is that there’s a global regulatory and policy context that is pushing across entire supply chains right now in terms of the Greenhouse Gas Protocol. You’ve seen perhaps in the news companies setting net-zero targets to say, “We’re going to be carbon-neutral by 2050.” That means that you need to work across your entire supply chain to do that and increase it ideally across your entire supply chain. You need to consider the impacts of the value chain as a business to do that. Increasingly, we’re seeing companies putting pressure on their suppliers to set science-based targets. Then that raises questions about, “Who’s going to finance that? How do you incentivize those operational changes?”
[00:16:34] Carol: I’m really glad you mentioned these very ambitious long-term targets, 2030, 2040. As someone who’s spent time in-house managing a global EHS function, I’m anxious for these executives and leaders, because they have a really tall order. What I think we’re starting to see, and Abby alluded to it, is partnerships all along the supply chain. It’s no longer every entity for themselves, but customers turning to their suppliers and saying, “How can we get more carbon out of this supply chain? How can we partner to reach this goal?” and maybe imposing goals on some of their suppliers. It’s a really, really interesting time and it underscores how businesses have to work cooperatively through their supply chain to reach some of these goals.
[00:17:43] Abby: One more addition here. This is happening in the context of not just climate-related pressures, but a technological change that we’re all very aware of with the use of technology, where B2B suppliers are now no longer just producing a product and selling it to a customer. They are using data and analytics to become strategic partners to that customer. There’s an opening to say, “Okay, we can partner from a business perspective, and now we also need to think about extending that partnership to how we address impacts like climate change that cut across the entire supply chain.”
[00:18:18] Carol: When I think about how companies need to get this done, I think there are going to have to be big changes, like changes in energy sources, or changes in materials used that have never been used before in the process. Then also, they’re going to have to really ratchet up their efficiencies. That’s all about using tech in the right way, it’s about using data in the right way to get real-time feedback, to make corrections. It’s very interesting to see the manufacturing floor really become a more digitized environment. I think that’s going to be a big part of squeezing efficiencies out of the system.
[00:19:09] Abby: I would say that, the full stop, you cannot fully operationalize sustainability without the data, and analytics, and visibility of the plant floor. Full stop.
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Now, back to the show. These are some interesting topics that have been brought up and it’s tying back to that idea of not just seeing it as an obligation or a duty, but as a way of creating value. There were a couple of things that I want to impact about what you said. One, Carol, you mentioned anxiety about the tall order of accomplishing these goals by a certain time, and really, that anxiety starts to come from not only in understanding that it is a lot to ask for, but it is potentially something that may not be accomplished, especially if it’s not prioritized correctly, or if it’s not looked at holistically.
Part of the problem with looking things holistically is you get caught trying to boil the ocean, and so then there’s a tendency to not take any action because there’s so much action that needs to be taken. I want to break down some of these ideas. One, I think, Abby, you were the one that brought it up, how do you incentivize, particularly across the supply chain? It’s not just your organization, it’s not just your company. It’s, “Who are you working with, and what are the standards that you expect from them?” What is that way that you can say, ”Look, this is the way that we’re doing business because it creates the most value for us, and it leaves a positive impact, and this is what we expect from you.”?
On the flip side, if organizations are adopting that mindset of sustainability bringing value, then it shouldn’t get to that point of, “The requirement is here, you have to do it this way.” It’s, to your point, leveraging something like tech to understand how you can deliver a better experience for your own customer who may be this other organization. That starts to bring in also the implications of the competitive differentiator, how do you win more business by bringing more value, and that value happens to align with these ideas that we’re talking about and these requirements that these companies are putting out? I think that that is a very good example of not just why you should do it now, but think of the return on investment because that’s the question that I wrote down.
This is all a build-up to a question is, a lot of times there is a need to justify the cost. I don’t know if you would consider that something that you see as a misconception, as in, it’s going to be costly to do all these things. Or does the requirement to let’s say, for example, a more sustainable operation where you’re not leveraging extremely low wage to slave labor to produce a good, does that then impact the cost? Does that cost then impact whether consumers are purchasing, et cetera? These are the type of thoughts that come in as far as, “It’s impacting costs, it’s raising prices, is it going to hurt our business?” Can you talk to us about the actual perception of cost versus value for companies?
[00:24:00] Abby: Sure. I think another myth to dispel is that sustainability is not just a cost center. Let’s break that apart a bit. There are absolutely cost outlays that companies need to make, and they need to make them smartly. Some of them at the base level is about license to operate. If you are in violation of legal compliance, obviously, on environmental performance, then you don’t have a license to operate. There are those investments that you need to make, and the bar keeps going higher in terms of what those are. Then there are things that also are investments you need to make because it’s important to talent, it’s important to investors, it’s important to stakeholders, but it won’t necessarily deliver a return in the near term.
Then there are the opportunities, and I’ve seen senior executives build sustainability strategies exactly as you’d build a business strategy, saying, “Where to play and how to win, and where can we differentiate and where can we win? Then what do we need to do, because it’s table stakes?” That’s a different frame for thinking about sustainability from, “It’s a good cause,” or, “It’s something we have to just invest in because it’s cost we have to incur to comply or to meet expectations.” That, then, is about understanding the value drivers of your business and how specifically performance on various aspects of whether it’s more efficient energy or more efficient water use that might be an investment in the near term, but that will drive costs down in the longer term. Whether it’s about more sustainable products that are meeting an untapped market or a growing market opportunity, it’s figuring out what those are for your business and what the material sustainable issues are, and prioritizing those based on where you can differentiate and where you can win.
[00:25:57] Carol: Let me just take that back to the supply chain too. We’re in a world now where these major companies, which are customers and have their supply chains, have made very aggressive public goals, and they need their suppliers to work with them. It’s no longer a nice-to-have for certain suppliers, it’s a must-have, or they don’t get to be on the preferred supplier list, right? We’re seeing some of these large companies say, ”If your sustainability program isn’t where it needs to be or you’re not mitigating these ESG risks, then you just can’t work with us.” It’s not an option. As Abby said, some aspect of this is table stakes. You don’t get to play unless you have a robust program.
[00:26:54] Abby: We worked with a beauty packaging manufacturer that came to us with the explicit ask to say, “We’re a challenger brand, and we need a seat at the table. Help us figure out,” in the near term, and it was a very short-term initial scope, “What are the immediate steps we can take to get that seat at the table, and then how do we stay at the table, and then how do we win?”
[00:27:14] Josh: Those are interesting points. I love that idea of, “It’s your license to operate,” in that there are bare minimums now. There are the table stakes that have to comply, and if you’re not at that point, yes, you are going to have to put forth the investment to get to that point. It sounds like, from what you’re saying, the risk there is penalties from governmental agencies. What do those fines look like? What are the impact, let alone when that happens? What kind of media coverage is that going to bring? Then what kind of impact is that going to have on sales as consumers who do have these demands of associating with brands that reflect their own personal values more so now than ever before?
It sounds like while there may be some costs to getting things in order and getting to the point of that ideal state, not only is there value but there is risk of you losing business by not doing so. The loss of business, the loss of making money, as well as back to what we were talking about before, the loss of people who will make these products for you, as well as the loss of suppliers and vendors as they also have their own standards of who we work with is really becomes an existential risk to the company. You risk not being a company anymore by not prioritizing that. Would you say that that’s a fair assessment?
[00:28:43] Abby: I think at the base level, that’s true, but you risk not being a company in the long run if you don’t do those basic things. You risk incurring penalties in the near term if you aren’t doing those basic things now, but then there’s a whole gap between what you do to achieve license to operate, or if you’re a supplier a seat at the table with your customers that you’re targeting, to being a leader on sustainability. The one other incentive, you mentioned government agencies, and we’ve talked about customers putting pressure on suppliers. The other angle, of course, is institutional investors who’ve engaged in a significant way in recent years. You have Larry Fink with BlackRock who is saying to all of investees, ”You need to show us a path to net-zero and you need to show us how you are going to align with specific climate requirements under the task force for climate-related financial disclosures.” Then you have State Street who built a methodology that is going to rank companies and those who are not performing as well on sustainability. They’ll vote against them.
Suddenly, I’ve heard executives just this week saying, ”Well, we really need to think about our strategy with BlackRock and decide if we’re going to take the steps or if we’re, God forbid, going to decide not to work with us, [chuckles] just decide we might not need BlackRock at the table. How do we take that forward? It’s causing those discussions in boardrooms right now, so there’s the investor angle as well, and that becomes a new angle on must-dos.
[00:30:09] Carol: What I’m seeing, that’s a bit of a change from the investor side, whether it’s venture capital or private equity, it’s a focus on the value side and the impact side. It’s just not enough to say that you have good programs in place and you’re governed well. Now they want to see evidence of performance in the ESG area, whatever that performance is, and for the first time, I’m seeing questions about impact. “Okay. The people using your product company that I’ve invested in, how much environmental impact, how much environmental benefit have they gotten?” I just think that’s a very powerful question for an investor to ask to focus on impact, not just management.
[00:31:10] Abby: The parallel question that goes with all of that is the data that you can, “How are you measuring impact? How do we get credible data?” Then the question becomes across the portfolio, “How do we get credible and comparable data across?” Then there’s a whole push towards looking at consistent standards for how companies are measuring and disclosing their impacts so that investors can make informed decisions.
[00:31:36] Josh: It sounds like, current day, it’s, “Hey,” not just, “We need you to think about this.” It’s, “We need you to prove this to us already.”
[00:31:45] Abby: Absolutely right.
[00:31:47] Josh: Don’t get ready to like– It’s not 2040 comes along and now we want to hear the results. It’s, “Tell me right now the impact.”
[00:31:55] Carol: It is not about just having a program for the sake of having a program, whatever, it’s in some environmental impact program or safety program. It’s about showing performance and having the data to back it up. I think that’s a real change.
[00:32:15] Abby: Even two, three years ago, I was talking to a head of investor relations at our Fortune 200 company. He said, “The key is we just need to tell a good story on ESG to investors and that’s fine.” I think, first of all, I don’t know that that was true at the time. It is definitely not true today.
[00:32:31] Josh: Yes. It sounds like, especially when you think about how visible everything is becoming, that now more than ever, a story’s not enough. The story has to match reality at this point because now everything is getting documented. This is getting us into the next topic that we really want to bring in. We’ve discussed why the urgency is now, especially when you may be setting these lofty goals to accomplish blank by a certain time, but leaders are being asked the hard questions of, “Prove it to us right here, right now, what you’re doing, because that’s going to impact today.” That’s going to make an impact today, let alone the other challenges that we discussed.
Let’s get into this idea of, “How do you operationalize sustainability?” I think that we’ve talked about some good things about how sustainability is not a separate goal, it’s really about how you do business, period, across every avenue of it. Now you’ve mentioned the idea of incorporating tech, having data to back it up because, at the end of the day, data is going to do a couple of things. Data is going to reveal those opportunities to make improvements. Data is also going to reveal the actual impact. I would love to hear from you how you’ve seen real-life examples of operationalizing sustainability, and as well as the tech that can really help support this cause.
[00:33:56] Carol: Well, the first step is to evaluate the actual impacts from your manufacturing processes. The second step is to craft a good program that addresses those impacts. Where we are now is we’re seeing technologies that are valuable tools for implementing those programs and getting the performance that you need. What I really like, that I’ve seen recently, are these connected worker platforms. You have a situation where you’re asking folks on the shop floor to implement a number of standard operating procedures, and maybe they didn’t have them in their hands, and maybe only paper was available, or maybe there was a lack of understanding as to what was supposed to be done.
Now with digitized SOPs, workers can more easily understand what they have to do. They can collect data as they’re doing it, and then at the backend, that data can be analyzed so that there’s more diagnostic capabilities. Let’s talk about it in the worker safety context. If you’re seeing a lot of injuries in a particular area, it’s really very beneficial to have a lot of data across a lot of different workplaces, and then you can identify where the real risk is. Much harder to do without a digitized platform.
[00:35:44] Abby: Absolutely. This gets to, we just talked about all of the levers of why this is so important from investors, government, talent, customers, et cetera. Senior leaders are setting ambitious goals and targets, and they need to operationalize these everywhere down to the individual worker on the plant floor. Without the right data and the ability to see what’s happening, and to analyze the performance, it’s very difficult to A, get a baseline and to, B, take steps to correct in real-time and improve performance, and to know where your hotspots are to zero in. Digitizing SOP is a really powerful way to get that visibility and to take those continuous improvement steps in real-time.
[00:36:27] Carol: It also, helps with, the efficiencies I talked about before. Manufacturing is really going to have to ratchet up efficiencies in various processes. When you have a system where you can collect data, maybe you can collect it in real-time, you can analyze it with a number of different methodologies presented in a dashboard. All of a sudden, you have a picture, perhaps horizontally, across a number of different manufacturing facilities, maybe vertically within one particular plant, but it unleashes the power of that data in a way it wasn’t visible and realized before. Time is always the enemy on a manufacturing floor, so anything you can do to build into a more real-time analysis of data, I think is a good thing. I look forward to the day where these platforms are then made smarter by artificial intelligence. I don’t know that we’ve really seen that yet on the sustainability ESG side, but I’ve got to believe that we’re really close.
[00:37:48] Josh: There are a lot of great points to unpack, and I’m going to start with the theme that’s consistent across– My question was about operationalizing sustainability, and one of the critical components there is time. You said it yourself, Carol. Time is the enemy, but I don’t think we realize how much the lack of access to the right tools causes things to take longer. We see that across the board, whether it’s a small issue, like something like, “How quickly can you respond to a machine going down?” That plays an impact. To what you’re talking about, the steps that you gave as far as, “How do we actually operationalize sustainability?” The first thing you said is, “Evaluate the impact that you’re having.” Well, how much time is it going to take for you to evaluate that impact without the right data sources, because without– Not just data sources but tools to do so because now it’s, “I need people to do it.” People aren’t going to be able to collect information as easily, across the board, without the right tools.
Then you got into, after you evaluate the impacts, now you’re going to have to really evaluate, “What is it that we need to change?” Change management is probably the most difficult part of the conversation. What you’re bringing up is, how do you make sure that the people that you are tasking with to accomplish the goals– Because it’s one thing for you to set the agenda, to set the direction, and set the vision, but you have to have a way of people being able to follow that, to implement that, and for the right people to track it, to make sure that it stays on task.
Ultimately what I’m getting at is, you mentioned Connected Worker, which I could talk for hours about not just how people want to work and how they live, which is connected. We all live in a connected experience, but it’s that ability to shorten time. The stronger connections that you have, the more real-time of an impact you can make. The example that you brought up of getting the data, having it aggregated, and being able to see it in real-time, it’s not that you need to see it in real-time. It’s that the quicker that you can make a decision that impacts the overall output, the quicker that you can see, “We’ve got a problem here, let’s address it right now,” across the board, that’s what’s going to help ease your anxiety, Carol, about the 2040 goals. The more that you can say, “Look we’ve got a problem that’s starting right here. Let’s fix it same day,” or, “Let’s not wait six months to find out that it’s a problem.” Moving to that real-time experience.
[00:40:32] Carol: Exactly. What gets Abby and I excited about this as sustainability professionals is, think about the co-benefits here. You have a way to, in real-time, identify a process that’s generating an off-spec product for some reason. You can shut that down sooner rather than later. The co-benefit is that you’ve avoided generating a lot of waste product, therefore your waste output goes down. Well, it costs money to get rid of waste, so you’ve saved money there. You are certainly contributing to the ability to manage towards a waste target. That’s just one simple and obvious example of how the immediate feedback has all of these, what I call, co-ESG benefits. You could say the same thing about water use, you could say the same thing about energy consumption.
[00:41:40] Abby: Yes. The co-ESG benefits are interesting because it’s important to really think broadly about where those might be. In that scenario that Carol just gave, the priority driver would be quality and ensuring that the product was delivered to quality specs and standards. Waste would be something that might be a secondary consideration. Thinking about holistically, “Where are those co-benefits existing?” even when we think the driver might be quality or it might be efficiency.
[00:42:10] Josh: Absolutely. I’ve seen firsthand the impacts of what we’ve referred to as these delayed responses because eventually, you respond. It takes a while to identify, and to Carol’s point, artificial intelligence, machine learning, that is going to be such a critical part because now it’s not just going to be, “Okay, I’m taking a look at the dashboard, I’m monitoring, I’m receiving real-time alerts.” The power of artificial intelligence, we’ve actually got an episode on our podcast where we talk with the founder and CEO of Odin technologies, which focuses on AI and machine learning for manufacturers, the fact that this helps shorten the time to insight. Now you’ve got all these variables in the process. It might be the process itself, it might how an operator executed a particular portion of a cleaning that leads to an impact. There’s all of these different variables that come into play that need to be examined when you are investigating one of these results. We talked about how important it is to look at the impact. By leveraging not just that connected worker to have that experience but also how can you augment how long it takes for someone to have the insights? Then the action to take action off of that insight, I just can’t stop thinking about it. It’s all about saving time and eliminating the time between an event occurring and your response.
[00:43:42] Carol: I liked that phrase, “shorten the time to insight.” I think that really sums it up very well, Josh.
[00:43:49] Josh: I think explaining operational sustainability, like really embedding that into your operations at all levels, I’m very excited about how we can make sure to get this message out and make sure to serve these individuals. That brings me to my next point, corporate citizenship. We don’t want our listeners to have the conversation stop here. We want that to continue. My first question is, what’s the best way to continue the conversation with the two of you?
[00:44:19] Abby: Sure. You can find our website at www.corporate-citizenship.com and you can find us on LinkedIn and follow us on Twitter. You can also look for Carol and me individually on LinkedIn and online, and then reach out to us because we work with a variety of clients, including a number of manufacturing clients on this exact journey. We work with people at all stages. We meet clients where you are from someone who’s just starting. I’ve had people call me and say, “What is this ESG stuff? Someone said I should pay attention to it,” and then we start the conversation, to companies who have had a program in place for 20 years and are looking to take it to the next level and really drive leadership. Wherever you are, we look to accelerate your progress on that journey and to do it with very much a value creation and risk management lens in mind because it’s about delivering value to the business and stakeholders over the short and long terms.
[00:45:21] Carol: Well said, Abby.
[00:45:23] Josh: How specifically can corporate citizenship help?
[00:45:28] Abby: Well specifically, we work with companies– Let’s say you’re early in your journey and you aren’t sure, or maybe you’re at a midpoint and you’re not sure what to prioritize in terms of what’s most important. We work across a variety of services but, in particular, we often start with companies just prioritizing, “What are the specific ESG related risks and opportunities that I need to focus on as a business right now?” Through that, we do a process called materiality that defines the most pressing material ESG-related and opportunities facing the business. That allows you to know whether you need to prioritize energy and climate, whether you need to look at water use, whether you need to look at worker health and safety, and to what level of emphasis and resourcing you need to put to tackle all of those areas.
It helps you then build a strategy that is aligned to your long-term business plans and short-term business plans, and to invest in ESG to find both that license to operate and that upside that we talked about. Materiality is one. We also build on that materiality and strategies to helping companies to set goals, targets, and really operationalize and embed into C-suite planning. Josh, you talked about the incentives. It’s so important to think about everything from how goals are incorporated into performance management, to making sure that companies have the right data platforms and support to get visibility to ESG, to culture. Thinking about, “What strong elements are there in the culture of our business that we could build on to drive sustainable performance?”
Then we also work closely on reporting an ESG disclosure. A number of companies come to us needing to do a first report to report and disclose to investors and to a broader array of other stakeholders.
As Carol mentioned earlier, getting the clarity of that data and measuring the impacts, how do you gather the right baselines and gather the right data to then report on your performance? Then related to that, we do a lot of work with ESG ratings, rankings, and frameworks which are important to an investor relations function in a public company in many cases. Then finally we focus pretty specifically on climate impacts. We do baselines to measure carbon footprints, everything to looking at climate scenario planning, looking at climate-related risks and opportunities, and building a climate-specific strategy to social impacts. We have a long legacy of measuring what previously was a fairly squishy concept of, “What is your social impact as a company?” and breaking it down to look at impacts for workers and impacts in the community and the other related areas of ESG that are important. Driving a social impact strategy. We work across the spectrum on sustainability.
[00:48:21] Josh: I’m going to wrap this with bringing this to one of the points you made earlier, where it’s about the time, and how quickly you can respond. If you’re trying to do it completely on your own when you don’t have the expertise or the frameworks or the strategies to do so, that’s going to impact how long it’s going to take you to actually produce results. Working with you, who can come in and provide that framework and can provide you with that strategy to get you on the right track, that’s something that’s really going to shorten that time to insight. I’m going to plug that in a few times.
[00:48:54] Abby: We are invariably an extension of our client’s teams because we’re almost always working with either an internal EHS or sustainability team that maybe wishes they had a few more people on the team, or somebody who is wearing multiple hats who’s the head of IR and working on sustainability or the general council and working on sustainability. We become then a rounded out extension of that team for our internal clients to help them basically prioritize and set a strategy and execute against that within the company.
[00:49:31] Josh: Perfect. I feel like I learned a lot. I appreciate your time. Thank you so much, Carol and Abby.
[00:49:36] Abby: Thanks so much, Josh. It was a pleasure.
[00:49:38] Carol: Thank you. Pleasure.
[00:49:42] Josh: That’s the show. Thank you so so much for joining us today. Conquering Chaos is brought to you by Parsable. If you’re a fan of these conversations, subscribe to the show and leave us a rating on Apple Podcasts. Just half the number of stars you think the show deserves. As always feel free to share what’s top of mind for you and who you think we should talk to next. Until then, talk soon, take care, stay safe, and bye-bye.