Pioneering Progress: ESG and Corporate Sustainability Conversations
[00:00:00] Shalini Manjunath: Hi, everyone. My name is Shalini Manjanath, and welcome to another edition of the Cloud Collective Podcast. Today, we will be talking with global sustainability and ESG expert Faith Taylor as she shares valuable advice for those embarking on a corporate ESG journey, especially some of the pitfalls and mistakes many corporate sustainability team members make even before they get started.
Welcome to our show, Faith. How are you doing today?
[00:00:34] Faith Taylor: I'm doing great. Thank you for having me, Shalini.
[00:00:38] Shalini Manjunath: Faith, we were just going through your LinkedIn profile, and it's impressive. Please tell us more about you and how you got into the sustainability and ESG business.
[00:00:51] Faith Taylor: Over 18 years ago, I had the opportunity to build the program from the ground up with Wyndham Worldwide, and what started me on this journey was my son, who asked me to go see the movie An Inconvenient Truth, and I understood that climate change would be a strategic priority for the company that I was at that time, and so I approached my CEO and created my job.
So he gave me the opportunity with the current job that I had at that time, which was heading new business development for the Wyndham brand, and said, start this with no resources.
I put together a strategic plan, put together a team across the entire enterprise, and then went back to him and said, I want to do this. And from there, it was year after year building the program where it became the world leader because we were doing things before a lot of companies were doing it in the hospitality industry.
What was most interesting was the economic benefits to the bottom line, which was. We were delivering 92 million in savings and consumption associated with energy, water, and waste. We were also able to use it from a recruiting standpoint. And then being on the Dow Jones Sustainability as the world leader, that actually was very helpful in terms of investors and how they looked at us.
[00:02:14] Shalini Manjunath: That's just fantastic. It was a brave decision and the best decision, I'm sure.
[00:02:19] Faith Taylor: Yeah, it was year after year.
[00:02:23] Shalini Manjunath: It's a pleasure to know your story, Faith. Thanks a lot. And, just as we progress, from your perspective, what is ESG? What are some of the major benefits for companies that successfully integrate sustainability and ESG into their operations?
Could you please talk a little more about that?
[00:02:42] Faith Taylor: Yes, so ESG stands for Environmental Social Government. And it's how a company manages that, which are non-financial indicators, along with your financial performance of the company. And those key areas are environmental, which is around climate risk, which is around your carbon emissions.
In your business, directly and indirectly, the water, the waste, your supply chain, and how you manage it responsibly with regards to the environmental impact of your supply chain, but most importantly, human rights in your supply chain and also diversity. So that's under the environmental bucket. And you have targets and goals and a lot of reporting around that today.
Under social is how you manage your talent education. It's diversity as well as under. That is corporate social responsibility, primarily volunteerism. And if you have a. Philanthropic arm to your business or foundation and how you also get your employees to participate and also your impact to the communities around the world in terms of social programs and then under governance is actually how you actually manage this entire process.
Is it aligned with your business, your executives, or your board of directors? They look at the board of directors and the diversity of the board, as well as how they're paid. And then a key area is code of conduct, which is ethics, as well as data, privacy, and cybersecurity are key areas and how you manage risk.
So you can see how broad environmental and social governance is, and there are metrics across all of that. The reason why it's important is because that you have rating agencies have looked at companies and compared their management of this area, and they look at managing this to manage risk and performance of the companies in terms of the impact on their communities.
What's interesting is that there are benefits. The S&P Global has market studies that looked across these different indicators, and they found that there is a positive economic benefit to reducing your energy consumption, and that's related to profitability or in terms of recruiting and retaining your talent.
There are incremental benefits to that, and particularly, Gen Z and Millennials absolutely care about this. They want to work with a company that has a sense of purpose and that diversity is also very important in terms of the overall performance of a company.
And then you also have the key areas around governance where they see managing risk, and they see a correlation there for how you manage risk, and if you manage risk, you perform better. So that's the economic benefit that the S&P Global Study actually outlines, and that's very important as to why companies have incorporated this into how they actually talk about the business, but more importantly, how they deliver a positive impact.
[00:06:03] Shalini Manjunath: Thank you, Faith. Who thought sustainability and ESG could be so complex, but you really explained it so well. Definitely, our small and medium business customers would be very keen to learn what it is and how we can get started. And probably we can cover it through the discussion.
My next question would be, what are the two to three most common pitfalls or challenges companies face when attempting to align their operations with sustainability and ESG?
[00:06:34] Faith Taylor: One of the major challenges is just Where to get all the data. As you can see, I talked about environmental data. I talked about talent. I talked about diversity. I talked about cybersecurity and managing risk. And so, where do you get all of those data points? There are guidelines, the greenhouse gas protocol, and the global GRI are other standards and frameworks that you use to actually develop information as to what to report on.
So the first step is to figure out what is material for your company, what's important in terms of these key areas, and then actually getting the data to report on it. That is the first step, and having integrity around that.
So the pitfall is: How do you get that?
How do you make sure it's accurate information, and then how do you set your key performance indicators?
That's one of the key areas. The other area that's very challenging is that there's a lot of regulation around this now that is growing. In fact, in the last 10 years, it's up over 150 percent in terms of regulations around climate around environmental performance and reporting on this.
So, to understand those different regulations and requirements for reporting, you really need to do that gap analysis and mapping of what is important for your company and the data and KPIs that you need. That's another key area. And then, to reach these goals and really develop a roadmap around that, a key thing is to look at those business strategies and your business model to align it with these key areas around the environmental and social governance and what you want to track, measure, and report.
What's difficult for companies is that you still have to align it with your business growth strategy and your business model to make sure that as you are reducing your footprint or improving your impact, it's aligned with your business. And the great thing about Kyndryl is that's how we developed our plans.
We do have a commitment to be net zero of carbon emissions by 2040 and 50 percent down by 2030, and we did that by developing a financial model that incorporated a lot of the information across the enterprise, and we also did that by developing an inventory management plan of all of these key areas, particularly in the environmental area.
But then also there are key areas that have been developed with regards to our talent. And there's a very robust program with regards to our cyber security, data privacy, and code of conduct. So you can see that it can be challenging to get information. It can be challenging to align it with your business strategy and also to understand what's important for you in terms of reporting externally.
[00:09:49] Shalini Manjunath: A good service provider, such as Kyndryl, can definitely help clients, simplifying this journey and aligning them to their business goals and strategies, everything that you mentioned. Thanks, Faith
Moving on, what's the first basic step that you would give to someone considering to embark on a sustainability and ESG journey?
[00:10:10] Faith Taylor: The very first step is to understand your scope and boundaries and do some type of materiality assessment to understand what's important in terms of these key areas of focus for your business and then also understanding for your business, how can we make sure that we're reporting on the right thing?
So, the very first step is to get the data, understand what your scope and boundaries are, and make sure that it aligns with your business model. That's absolutely very important.
[00:10:48] Shalini Manjunath: Fantastic. And, some say, build ESG with the end in mind. What does that end mean for our customers?
[00:10:57] Faith Taylor: So that means when I was talking about the original regulations, rating agencies, and investment requirements, As well as customers who are demanding you also to meet these goals and understanding what those are.
For example, under regulations, if you're a global company, you may have to report on the nonfinancial metrics associated with this whole ESG area. And that is a requirement already in Europe under the Corporate Social Responsibility Directive. So we as a global company and many of our customers have to report on key indicators in that area.
Then there are also other regulations, whether it's the California recently launched regulation around climate change and disclosures around this, as well as looking at what rating agencies score companies around this. So, this is where investors are looking at different agencies, such as ISS, Sustainalytics, and MSI.
They give you a score in terms of your performance in these key areas for your business and industry. And you can look at that also, as you build out your program, to see, we want to make sure that we're aligning with that, that we're complying with that. And then there's the customers. And we have many customers today that are requiring us to report on our progress in these key areas.
And because they're also under the same regulatory requirements to get to net zero to report on key indicators around their talent and governance issues. So, therefore, they also require us to do that. So, outlining all of those areas.
And then, looking at your program and building it to align with that, which again, you want to focus on what is important to your business. What is material is how you build with the end in mind. And that's what I talk about in terms of how we've been able to, within our first two years, accomplish what we have done so far.
[00:13:09] Shalini Manjunath: That's a great piece of advice, specifically in the area of regulations for the U. S. and Europe and, hopefully, in the future episodes that we would learn more for other regions too.
Why do you think it is a great option for corporate sustainability team members who are looking to improve their ESG performance and impact?
[00:13:30] Faith Taylor: I talked about earlier the economic benefits to the bottom line for the company, but also what's really important here is having a sense of purpose and aligning your values and principles to how you go to market or how you work with your communities and how you deliver the benefits, economically and socially.
It is now linked, and we are a global economy, and we are in the technology space. So, when we look at solving these major issues, which are outlined by the UN Sustainable Development Goals. They have 17 goals around all of these key ESG areas.
You can see that a company's performance is also profits with purpose, and doing both together is very good for a company because it helps you to engage your employees, number 1, align the benefits that you're delivering economically, which is absolutely required, but also to the communities and that has over the years, if you look at studies like a TOMO study that looks at the different benefits in terms of stock prices and actually outlining the non-financial and financial benefits, they call it tangibles and intangibles that today for most companies, when you look at the stock price, 90 percent is associated with intangibles, which are aligned with environmental social governance.
And what are those things? That's your IP. That's your brand value. That is your customer list. That is your talent. Those are what we call intangibles. And that is now over 90 percent contributing to the value of a company. The other 10 percent is the tangibles, which are fixed assets such as the buildings you own, the cars you drive, the equipment, and the cash.
So it's really interesting that they've been tracking that for over 20 years, and you see the correlation between environmental and social governance, as well as the tracking of the importance of this.
[00:15:53] Shalini Manjunath: Thank you so much. That was a wonderful overview of sustainability and ESG.
This was a great interview. Just before we let you go, we have one more question. How can people learn more and get started with sustainability and ESG journey? Can you please walk us through it?
[00:16:13] Faith Taylor: Yes.
Please look at our corporate citizenship report because it details all of the information that I talked about in terms of our purpose, our values, and what we're doing.
There are training and education courses that you can participate in. We have a mission net zero training and education course that covers this information, and it's a great primer in terms of a 30-minute program,
But we also have other ways for you to participate. Our Green Guild, where we're developing innovative solutions sustainability solutions and recently launched on the bridge, a carbon assessment, and also phase 2 is a sustainability advisor.
So we have many touch points where people can participate.
I would say that you can also do your own research online. There are so many incredible resources that you can find and take advantage of.
And I'd love to recommend people to go to Project Drawdown.org, which lists 100 solutions that we can execute today to help us mitigate climate change.
So there are many ways that you can participate, and I really look forward to everyone doing that.
[00:17:26] Shalini Manjunath: Fantastic. It was a pleasure speaking to you, Faith, and I hope to do more episodes.
Thank you everybody. I'm Shalini Manjanath, and thanks for joining us on Cloud Collective Podcast.