Name: Impact Initiative 2023: Two Steps Forward, One Step Back: Esg Resiliency
Uploaded: 2023-09-13
Duration: 17 min 58 s
Description: Roger Martella, Chief Sustainability Officer, General Electric Kathleen McLaughlin, Executive Vice President and Chief Sustainability Officer, Walmart Inc.; President, Walmart Foundation Ann Tracy, Chief Sustainability Officer, Colgate-Palmolive Moderator: Peter Vanham, FORTUNE

Roger Martella, Chief Sustainability Officer, General Electric Kathleen McLaughlin, Executive Vice President and Chief Sustainability Officer, Walmart Inc.; President, Walmart Foundation Ann Tracy, Chief Sustainability Officer, Colgate-Palmolive Moderator: Peter Vanham, FORTUNE

Impact Initiative 2023: Two Steps Forward, One Step Back: Esg Resiliency

Conferences

Roger Martella, General Electric Kathleen, McLaughlin, Walmart Foundation, Ann Tracy, Colgate-Palmolive Moderator: Peter Vanham, FORTUNE

Well, good morning, good morning everyone. Uh If you are feeling a little down because, you know, it's been a heavy morning. Well, I am here to wake you back up because I am in the middle of my day, caffeinated and ready for this discussion. Uh I wanna get into this, of course, we're going to talk about the ESG backlash in the next 15 minutes. But uh I want to start with you Roger. You've had also other things on your mind. I think ge I was actually wondering uh what GE do you actually work for? So it depends on the day. Um And it's a great question. So as you know, is 100 and 30 year old company founded by Thomas Edison has changed a lot over 100 and 30 years, many different businesses, many different great innovations. But one thing has always been true in those 130 years. It's been focused on innovating technology to lift up the quality of life for people all around the world. So when we talk about sustainability, that's never been more important. So today we are separating into three separate companies, our health care company very critical purpose. There has already spun off as doing quite well. And early next year, our energy businesses and our aviation businesses will also be separate. The energy businesses provide one third of the world's energy help provide one third of the world's energy will do it increasingly in a carbon neutral way. The most diversified portfolio, our aerospace business three out of four engines and also has a net zero vision. I I work for all the business like a hard choice to make then for you. And I will, I will be with energy II, I feel very passionate about our aerospace business, but I think energy um is really the, the urgency at the moment, we have to decarbonise the energy sector so that other sectors can then electrify and decarbonise. So I'll be headed in that direction to help support those. Uh we look forward to that and I think we, we all support that decarbonization drive, not just of the company, but of course, the entire economy. Nevertheless, I don't think that at least for me, you know, GE was not the first company that came to my mind when I thought about a topic as ESG. Um and that's of course, because of, you know, the whole history with Jack Welch and you know, the idea of shareholder primacy back in the day. Um where does GE, whichever of the three I suppose, where does GE stand today on ESG as such? Because we're talking about the backlash against ESG. Sure. Well, we think of sustainability. It's core to what we do. As I mentioned, Thomas Edison's goal, innovate the technology and lift up the quality of life. So all three of our businesses sustain ability is core. And when you talk about something like ESG those aren't letters, we necessarily, we don't use those silos internally. Sometimes we might engage, you never hold, we, we don't really align in that way we cover. I think the topics that are part of ESG, but we don't really use those silos internally as, as we're talking about. So what I I frequently think is going back to Jack, we, we may have the world's best sustainability goals. I'm not saying we do, but let's say we do or we have the best mission. All of that is for nothing if we're not successful as a business first. And this is really, really important. This is maybe where there's some confusion with ESG. We have to succeed first as a business and we have to be unapologetic about that. I don't mean to be provocative but like we have to return for our shareholders, our investors, our employees. And if we can do that's a G I know. Yeah, that's a G. Well, then we do that and then we align these important sustainability goals, decarbonising energy transportation to our business plans. And that's my job is to bring that alignment together. And so we see it as a mutually inclusive opportunity, not something you have, you had any backlash in your business uh on esc or sustainability. We always have backlash. And I think that's because we take a very pragmatic view. Some people will say we should be doing more and some people should be say we should be doing less. And we have very vigorous discussions with our board which is very diverse. Some want us to do more and some you know, might be taking a different view. We end up with this very pragmatic view and an example of this, I'll give you one rip from the headlines. Example, a few years ago, we make gas turbines. We think gas turbines are critical to dec carbonizing the planet. We make wind turbines, we think they are critical, we make nuclear power. We had a lot of pressure from certain stakeholders saying we want you out of the gas business, that's a fossil fuel. We looked at it very closely and we said we're going to be unapologetic here. We think we right that gas is critical to dec carbonizing places like Vietnam Bangladesh. The world has now come around largely on that view. And I think it was important for us to remain pragmatic and get to the right answer. Good for the business, good for climate change, good for sustainability, right? And I think that gets to the question in this panel, which is what is your nord star when you're dealing with headwinds like that on, for example, ease or sustainability. I want to go over to you Kathleen. You know, of course you're representing a company that cannot afford to get into a political, um, controversy you serve, I suppose all Americans. Is that true? I mean, do have stats on that. Yeah, we do. Our customer base reflects America, our associate base, our employee base reflects America and the world. We operate in multiple countries around the world. At the same time, Walmart has been, you know, sort of unlike I think GGE an explicit fan of stakeholder capitalism embraced the idea of stakeholder capitalism and, and I think its leader has been sort of one of the leaders of that movement. And of course, if you think about stakeholder capitalism, you think about ESG your function, it includes ESG is that right? So when you are now faced with this ESG backlash, how do you deal with that? Yeah. So for us, and I think this is probably true for many of us in the room, our focus is on shared value. So it's just simply recognizing that our long term business success, financial success value creation strategy um really depends on the extent to which we can address the biggest concerns that are relevant for our business, on the minds of our customers, our associates, our suppliers, our communities, policy makers and communities um and things that we think um we can actually make a difference on through our business. So you talked about, you know, you gotta get the business right first and then you can for us, the way we get the business right is by addressing the things that matter most um to those stakeholders. So, um you know, if you think about value creation models, NPV, what goes into those assumptions about your continuing revenue streams, your cost structure, your sources of advantage that future value creation model depends on the assumptions you make about. How are you governing your company? How are you handling the environmental issues? How are you handling the social issues? Um So for us, it's part and parcel and like you um the priority themes that we have identified uh don't neatly fall in silos of ees and G, you know, for us, it's four things. It's opportunity, economic opportunity that we can create for our own people through advancement through for suppliers in an equitable way. Um It's sustainability of retail and supply chain, social and environmental sustainability. It's community resilience because we operate in 10,000 communities around the world and their um livelihoods, the extent to which they're thriving. Our business depends on that and then ethics and integrity, having the highest standards as a multinational business around those things. So our strategy is to address whether it's energy transition and climate change or workforce development and advancement of hourly people through upskilling and career path. Those things are important for our business success. So it's very integrated for us. So if I get it right, you're replacing the acronym ESG with the acronym OS re opportunity, sustainability resilience. You know, we don't really use the acronym but uh either of those acronyms. But uh but yeah, it's, it's really about the fundamentals and I think, you know, um to the extent that there is backlash, it's because of um concerns that people have all across the political spectrum about the apparatus of this. What's evolved, how is it working? How is it showing up in companies? And maybe we'll get into that a little bit. Hm. Yes. Uh, let me maybe turn over to you and, uh, you know, you work for a company that I suppose has been dealing with backlash for quite a long time. Um You know, when you look at your supply chain, I'm sure you were part of the movement back in the 19 nineties and two thousands where you had uh advocacy, you know, ens ensuring that your supply chain was clean or sustainable or things like that. And then perhaps ESG was a response for you to that previous backlash. Is that right? Or, or where does g fit in your uh Yeah. And I think you're starting to hear, you're going to hear from me, a common theme that you've heard from, from everyone else. And even in some of the round tables we've been participating in that we, we tend to think of it as sustainability and social impact. We don't use the term ESG and we never have also not, we sometimes when we're interfacing with investors, that's where it comes up. But other than that internally and even when we speak externally, we don't use the acronym. So it's so it's sustainability and social impact for you. Yeah. And like Kathleen described, we have a very focused strategy on what's relevant for our business and we also believe so. But going back to your, your first point um as a global manufacturer with a footprint all over the world, yes, we've always been facing kind of resistance whether it's ingredient controversy or clean supply chain controversy or these types of things. So we've always, we've been doing this for 20 years over 20 years and whether it's addressing a responsible sources or um even we've been measuring in our factories, uh greenhouse gas emissions, waste to landfill reduction of water and energy for over 20 years. Our baseline goes back to 2002. Um So we've always felt this was important. It's a, it's the right thing to do for manufacturing for our supply chain, for operations. Um It's made us more efficient, fast forward to today. And our purpose statement is reimagining a healthier future for all people. There are pets in our planet and that is our North Star. Um And we believe, you know, all those issues we've had to manage, those are risks, all companies face risks, we face risks relevant to our, what's relevant to our business. But we also believe there's opportunities um and, and opportunities to grow the business. Do, do you not have backlash today then on your ESG work? Because you, you know, the things you mentioned that you measure they constitute ESG so you actually embrace ESG in, in what in your operations. So do you not face backlash on that politically speaking by any of your constituents? For example. Well, if you look, if, if Colgate were a personality, we're, we're kind of uh an introverted quiet company that we, we don't, we don't tend to, we try to, we actually, that's very swiss, by the way. Yeah, we steer clear. We're probably one of the few companies that don't have anybody in Washington. We don't have government affairs. You do not have any, you don't have nobody with nobody in the swamp. No. Well, you said that I didn't uh we, we'll turn to another, you'll turn to uh to another topic. Um Maybe from the audience. If you have any questions, please raise your hand and we'll bring the microphone to you. Mhm. Um And then unless there's a question from the audience, I'm going to keep on asking questions. Um So please feel free over there. You know, I have to say, II, I once had this sort of contest of who can be silent for the longest and I love that you know, I won. Is this working? Yes. So Jeremy Hanson with Hydro Struggles, I, I can't imagine a better panel for, you know, this, this discussion. I guess the question is, um you know, I think Kathleen, you mentioned you operate across 10,000 communities. So if you think about in all of your companies, you've got, you've got to manage across these many human boundaries in light of the divisiveness, you know, that we're faced with. Now, what are the skills or principles that your ceos and your board follow to do that effectively? Yeah, I I'm happy to uh to talk about that. So I mentioned um the litmus test that we apply for uh prioritizing our environmental social governance agenda. And we have, as I mentioned, four themes, standing issues in each of those based on three screens. One um is the issue relevant for our business in terms of valuation. So long term valuation. So you talked about risk and opportunity against revenue cost, you know, advantage returns, et cetera. The second though goes to your question, which is what do our stakeholders expect of us? Meaning the customers, the employees or associates, the suppliers, communities, policy makers and it's not always the same. So the listening that's required and we have many ways of of doing listening. I'm sure many people, you know, in this room, um consultations, town halls, community meetings, social media, social listening and so on. And um when new issues arise or crop up issues at the moment. That's really where the listening is most important and it, and what we have found is uncertain issues. Not everybody agrees. Um There are differences of opinion amongst our customers, differences of opinion amongst our associates. And sometimes it's tempting to kind of go out with the view that you feel good about personally. But does that reflect what people believe and how does it connect to your role as a company? And do you have license from those stakeholders to even engage on that issue? You know, a lot of people have said Walmart, thank you very much. We appreciate your opinion, but please just tell us the bananas like we don't want to know what you think about whatever the topic is. And then the third is, would our engaging in that issue, make the outcome better or worse? Because sometimes getting involved in something we actually don't have the capabilities, the assets to actually make a difference. So for us, with those screens, it's very much. All right, we're gonna take on something. What's our strategy? And we put as much effort into figuring out that business strategy on issue X, whether it's energy transition, digital citizenship, um forced labor in the tuna chain in Southeast Asia, whatever these issues are, we put as much effort into defining the strategy with those stakeholders that are involved in that system as we do any other business problem and then measuring it that way. Um It's a very sensible strategy. I saw a lot of people nodding along when you, when you mentioned those three screens, now, what it does not include at least those three screens is ethics. No, no, it does. Ethics is our fourth. Is it? Ok. So, so, you know, ethics and integrity in terms of um corporate governance for, from the human rights or human rights, you know, policy. Yeah. So that's a really that comes first and then when you've done that, that's when you Yeah, OK, I understand it's, it's a, it's a great uh approach I think and a lot, a lot of people would, would, would probably agree. As for ESG I want to ask this question to all three of you. Um Do you still use the acronym in your engagement with some stakeholders? And if so whom I I we will use it when the context is right? II I think as mentioned, sometimes the stakeholders will wanna talk specific about ESG there might be a disclosure and we say this is relevant to what some people think of as ESG again, we prefer to talk about our. So it's, it's uh reactively when reactively. OK. How about you? We use it with certain stakeholders in certain contexts. So certain investors have said to us, institutional investors, please, on your website just can you have an ESG micro site? So we know where to go. Don't call it something weird. That we don't know what that is like, we need to know where to go to get the data that we need for our own governance. So literally, if you go to our corporate website, uh pull up the page, you'll see, we have it double faced, you know, we're retailers. So we put, you know, the bananas in two locations in the store, same thing on our website. So we do have ESG as a way to organize the topics, our priority issues. And on that same page, we have our four themes of opportunity, ethics and, and so on. So um we use it where it's useful. I mean, the trouble with the term is it's become a bogeyman, it's become, it means a lot of different things to different people. Um You know, and as I said, sometimes for legitimate reasons that people should be concerned about that and then sometimes, you know, not, but uh Roger, do you have a section on your website with ESG on it or? No, we have very similar. We have a section where you can find ESG and it will then link you to the way we share our. How about you? Yeah. Um I think similar to Kathleen, you know, if you were walking down the street and ask people about ESG, I know a lot of people wouldn't recognize that, but it is more a term used by investors and even by our board, that's the stakeholder group that we would refer to it as. But like I said before, we prefer to call it sustainability, socially impact. But the website point is really important because a lot of these um surveys and reports and aggregate reports that we have no control of, but they have the chat bots out there going out and grabbing stuff. They're looking for specific terminology to get accurate data to pull on your company, like MS C I etcetera. So that's a whole another topic for another day. But yeah, it's important to acknowledge that. So that also means I have to adjust my conclusion. A couple of months ago I wrote ESG Is Dead Long Live ESNG. But now I've learned from this discussion that in fact, the ESG lives on, on the interwebs. Fantastic. I want to thank you all for uh the wonderful discussion and I look forward to hearing more of you in the coming year.