Bea Perez, Senior Vice President and Chief Communications, Sustainability and Strategic Partnerships Officer, The Coca-Cola Company
Kristina Wyatt, Deputy General Counsel and Senior Vice President, Global Regulatory Climate Disclosure, Persefoni (joining virtually)
Moderator: Peter Vanham, FORTUNE

Impact Initiative 2022  - The Future of Reporting Standards

Conferences

Bea Perez, The Coca-Cola Company
Kristina Wyatt, Persefoni 
Moderator: Peter Vanham, FORTUNE

Okay, welcome back everybody hope you enjoyed your lunch round tables um, and the conversations that took place there. Um I think and I hope you all agree with me that these sessions and our morning sessions as well are really highlighting the benefit of us being in person um and gathering and and you know, discussing and sharing our insights and knowledge for the benefit of the entire impact initiative community, giving us practical skills to implement at our own organizations. Okay. And now onto the home stretch of our program, our next session is going to address how the new sec climate reporting requirements are pushing climate risk and strategy to the top of the agenda for senior executives and for board members. Something that has come up repeatedly in our conversations. But what are the challenges in implementing the new regulations, especially when it comes to scope three emissions to assess the impact of the new rules will tap into perspective from both the public and the private sector's. Please welcome Be Perez. Senior Vice President and Chief communications, sustainability and strategic partnerships officer at the coca cola company. That's all she does just that. Um and joining virtually as well is Christina Wyatt, deputy general counsel and Senior Vice president of global regulatory climate disclosure of Persephone and to know in her previous life, her previous role as Senior Counsel for climate and E. S. G. At the sec Christina helped draft the proposed rule. So could not have to better speakers for this. They're going to be in conversation with fortunes Peter Van. Hello, it's good to be back with all of you and of course would be. And we'll be joined in just a minute or just a moment. Hopefully by Christina. I'm gonna ask Christina. Christina if you can see it, if you might join us on this virtual trip, uh, and join us in taking the virtual revolving door back to the sec. And could you perhaps tell us when you're there, um, what went on into, uh, you know, your own thinking and out of your colleagues when you were making these proposed climate disclosures? Absolutely. And, and thank you so much for having me. I'm so sorry that I can't be there with you in person. It's obviously a wonderful event. And, and I wish I could be there with you in person, but happy to join you remotely. Um, I joined the sec right after President biden was elected. And my, my purpose in joining the sec was to work on the climate rules, to work on climate and the sec more broadly. And the first thing that we did was to listen to stakeholders, principally companies that were reporting and investors that are you using the information that companies report? And we were really trying to understand, what is it? Where are the pain points? And what is it that investors want? And what are the concerns that companies have? And we found that investors really wanted to have consistent and comparable information about companies, climate performance, their climate related financial risks and opportunities and to have that information in a format that would be reliable, dependable and comparable from company to company. And it also happens that many companies were telling us that they wanted to have clearer guidance about what to disclose and how to disclose it because this was still during a time when we were all sort of waiting in this thing that we called the alphabet soup of different reporting standards that will come together and the alphabet soup has been um sort of rationalized and, and and reduced down to some key reporting principles. But at that time there was quite a bit of Of consternation among companies who really didn't have clarity as to what they should report and how to report it. So those were the things that we were trying to address. So you wanted to create some consistency and comparability. Now I want to ask you be, you've been on that journey for quite a long time at the Coca Cola Company you told me to start in 2005, I think that's far before anyone else has probably been doing these disclosures. So tell us about why you have actually decided back then to start that journey of voluntary disclosures and how that has led to today. I think what Christina said is true, which is we wanted common definitions and standards. We operate in over 200 markets around the world and if we're going to report out on our carbon, we wanted to make sure that even our own system and suppliers throughout the value chain had a way to look at it a definition that could be standardized and at the same time would allow for us to have transparency. And so it's for us it's really important because when we set the goal, we set a goal to reduce the carbon of the drink in your hand by 25% 20. So we set that goal. It was in 2010 to 2020 and it was based on the 2010 baseline. So we started with the reporting through CDP and then after a couple of years we said we really need to set a target. That was before we were talking scope one scope two, scope three. We said that when you say the drink in, in the hands of the consumer, so for this drink in your hand, how you manufacture, distribute it included the whole value chain And in technical terms of course that includes so called scope three emissions, correct? The entire value chain scope three. Now, what we found is that that was a great start. It was imperfect because it wasn't what we would define today as our new science based target, which we we've moved to that. So carbon for the drink in your hand could allow you to grow the business, but you would, You'll be growing your carbon, we looked and we said we actually need to be careful that what we want to do is reduce absolute carbon. And so that's why we moved to science-based target to 2030 and we also have an ambition to net zero towards 2050. We said we have to start first. We don't want the hockey stick right where everyone waits till the end. But so why why would you have started that journey so many years before any other company would have done that? There were some other companies doing it. I mean CdP existed because people did want disclosure project and so we weren't the only company were one of the leaders, but we weren't the only company that because if you look at, you know coca cola's business, we sell wondering time to communities. We wanted to be a responsible business. If you go all the way back into our history, water is critically important to a beverage business. It's also important to society. And we looked at what her impact on society since this is the impact initiative summit, it's important to understand what is your impact, good and bad and how do you make sure that you're driving to be a positive, you're adding value to society and adding value to nature and not taking away. And so unfortunate that when coca cola was established long before I was even there, it had a mission to make a difference in society and this has always been a part of our purpose and a part of our D. N. A. So now of course uh were returned back to to Christina. You know, one of the things that at the time the sec has done was to say we are going to include these scope three emissions, but we will only do it if they are material to the business. Could you walk us through what sort of balancing act you were doing at the time to say yes, scope three but only if it's material and where you are on that now perhaps. Sure. So scope three emissions cover a vast array of activities. There are 15 categories of scope three emissions. And you could get really minute in terms of the level of detail that you're getting into for any given company and trying to report their scope three emissions. And so by putting on materiality filter on the requirement that these emissions be disclosed. It's asking companies to evaluate their emissions and their value chain and determine are these really important to our company, to our investors and in which of those categories of emissions are really important because there is a balance between the burden on companies to report and the value to investors of the information. And we really wanted to encourage companies to conduct that analysis and themselves come to a conclusion as to what's that information that's most important to investors and to focus on disclosing that information. Now you made that calculation of course, on behalf of the companies and then earlier this year, the sec said, well now I'm gonna ask directly to companies and other organizations what they actually think about our proposal. And it turns out that, uh, you know, companies weren't really on board with what Christina just said, they were like, well, we actually don't think it's a good idea to include scope three emissions now. Um, he was business roundtable of course, was one of the organizations provided feedback and coca cola company signed that. Now the thing that I don't understand, b is if you are such a frontrunner on scope, three emissions disclosures and reductions, why sign a BRT statement that doesn't start by saying we love this scope. Three disclosures. Well, if you go back and read the letter, it actually gave an indication during the open comment period which we did appreciate and I know the other companies did and actually feedback was requested. So that was the purpose of the letter to give feedback and it outlined what we really want is a little bit more detail. We want the framework to have definition so we can have the comparator ability. We want to make sure that people are assuring their data so there needed to be points within this that outlined here are the things that we would recommend. So it wasn't against it, but it didn't come out and say it was for it either what it said, it would work, the company is in favor of? We are, but what I will say is what was written in the letter is really important Because while 85% of our carbon is um scope three, it means that it's uneven versus where people are on sort of their journey in reporting. So we have suppliers who are very small family run businesses too big multinationals and so to apply the same exact requirement to both of those, it could actually put that small family run business out of business because these are real significant investments that have to be made. And so how do you actually help them get on the journey while you put the pressure on the big multinationals who maybe already have some of the mechanisms in place and the investments in place. So it's about making sure we're looking at fairness and consistency also length of time for implementation. So we're absolutely for the disclosure, it actually helps us to level the playing field. It's just a matter of how do we help our suppliers get to the same place? And I mean, that's that's new to me and I appreciate the clarification Christine. I mean, unfortunately you did join us in virtually taking the revolving door back, but in reality, you're no longer making those disclosures, Would you be able to comment though? You know, if you hear the feedback of of b and others, do you think that's sensible feedback, do you think we'll see that taking being taken on board in the sec proposed disclosures and and is that going to be the outcome that will go with namely, scope three? Yes. It'll be adapted to make it fair and and and the timeline feasible. Well, first of all, I have absolutely no insider knowledge as to what the FCC might do when they adopt final rules. I think what we said is imminently reasonable and is exactly why the FCC puts out proposed rules for public comments because these are hard issues. They're very, very hard and it's critically important that the sec has the input from leading companies like coca cola from the investor community, from all of these various stakeholders who are going to be impacted by these rules ultimately, and I can tell you with certainty that the SEc is taking into consideration very seriously considering all of these comments that were submitted and will incorporate them into the final rules. I do want to highlight something that we said, which is to say that this is a journey. This really is a journey and getting to the point of having good, high quality scope three data. It's gonna take time and I think there is a bit of a misperception out there about how, how one can go about getting scope three data, it's perfectly acceptable within the proposal to use industry average data, for example, and not have to actually go to each and every one of your suppliers. I don't know how many suppliers coca cola has but I would venture to guess, you know, it may be in the millions, it's a lot of suppliers. Right? So to have to go to each and every one of them to get actual data is a bit unreasonable. And what we would expect is that for most companies and particularly large complex companies with complex supply scenes, they're very likely to get actual data from their largest suppliers and then use industry average data for their smaller suppliers. But then over time work to build more real actual measures data further and further into your supply chain, which again, I think reflects this idea of this being a journey that started to improve. So certain inference of scope three emissions for smaller suppliers was already acceptable in the initial proposal. It could be an estimate initially. Absolutely. And that is perfectly consistent with the greenhouse gas accounting framework that the sec proposal is based on and that frankly the various proposals and rules around the world are based on which is the greenhouse gas protocol. It's perfectly fine to use, for example, spend based data to say I'm purchasing X number of dollars worth of this input and there's an emission factor that would apply to that that would give me an estimate of the emissions associated with that input and that's perfectly acceptable. Would you say now that you're at persephone and you've been talking to companies that are going to have to do climate disclosures, Would you say if you go back in time, would you still make the same proposal as you have made earlier this year with the sec or would you change it? No, I would make I would make the same proposal. Um, I mean there there might be things around the edges that could be improved and I think we're seeing that in in the comment letters and I think that the FCC will improve upon the proposal when it goes to adoption, but in broad strokes um, I think that the proposal hits the right point. Well, that's very interesting. I want to see if we have time. I think for one question in the audience, if you if you want to raise your hand that will come to you. So yeah, over there. Thanks. Hello. Ben jones incompetent boards. Um, so we now have seen that the C. D. P um, standards also being used in terms of the the biden administration. How does that relate to to also the sec. And what will that push that we're starting to see the power of procurement that way. Thank you. It's uh sure. So they have C. D. P and T C F D. So there's two of them that are closely related and for us. I think it's if you, I mean, I have not read the full detailed proposal. My apologies, but what I would say is that it actually helps to feed in the data? So it gives indications to what the definitions could look like, how the industry is already reporting. And so for us, an ideal world, if I could wave a magic wand, I would love for the sec to adopt one of these existing frameworks that many companies have already been filling out. I'd say none of them are going to be perfect because it is a journey and things can always be improved upon. But I do think it makes it a little bit easier to actually scale how many companies will start to report if we can look at existing frameworks and take that forward. But you know, the, I know the sec taking their input. They're not done with their comment period right now. So that's all I can say because I am not a fortune teller, I don't know exactly where it's gonna land, but I think it sounds like the two way conversation and the listening is occurring and the corporations have been able to give the feedback which is very encouraging to me, Christina perhaps for you and finally, you know what's next? You know, you you have a good view now, both from the regulatory perspective and from the companies you work with today, what do you expect to come out of this? Are we going to see soon the sec disclosure being voted and enacted as of 2020 for um do you expect, you know, as the land somewhere else, perhaps on international standard? What what do you see on uh in your magic wand? I think the sec will move to adopting the rules that they proposed. I would say to the point about the C. D. P. And to this point about alignment. One of the things that we did at the sec was to really try to build the proposed rules on existing standards that were in place and to work with the international community to align the disclosure rules and standards. So the T. C. F. D. That that he mentioned is really the core framework for thinking about climate related financial risks. That's built into the C. D. P. And it's built into the sec proposals as well as the various proposals and and rules around the world. And that is quite helpful. We don't want to ask companies to start to build something new when they are already reporting in a certain way. Right. And so I think what we'll see is, is the FCC rules going to adoption. We'll see companies really starting to do what coca cola has been doing for a long time, but to get it to gathering the data and really thinking about how they're reporting it. Thinking about how their carbon emissions translated into climate risks, how they're going to set goals and work toward mitigating that climate risk um and the financial risk associated with it. And I think that ultimately this is going to become something that feels much more like financial reporting, that becomes just a norm for companies, once it becomes easier for them to actually calculate their emissions and think about their emissions in terms that are similar to their, their financial statements. And surely persephone will help companies along the way. We've actually heard a couple of companies today work with persephone and perhaps no you from that work already perhaps finally be, you know, I'm not really a big coke zero drinker, but perhaps I might be a coconut zero drinker. I like that. We might have to have that new brand coconut zero. When can we expect coconut zero to be on the market. So our, our vision is 2050. We would love to get there sooner right. Which is why we have these interim goals. The world cannot afford to wait. We're in crisis. I mean, anyone here who is looking at what's happening every single day in our world in terms of how the weather patterns are changing the amount of disasters that are taking place. We all share the sense of urgency. But for you, that's right. The target remains 2050. The target remains 2050. It's an ambition. It's not a target. So I want to, our target is to 2030 in terms of the science based target initiative because it's really important to do it. But for us, we sell our drinks one community at a time. If we're not a responsible citizen in our communities, then we won't be welcomed in. And so for us, it's about taking action today. It might be imperfect. We will absolutely make mistakes along this journey, but we're willing to take action to correct them and to do the right things. And I think that's what the world needs and we all have to play apart together. All right, we'll try to make it all happen. And I look forward to the coconut Zero B Christina. Thank you so much. Thank you.