Getting started with ESG reporting, metrics and measurements

in today's video you'll learn how to measure esg performance in your business including what are esg indicators and ratings we also explore how and where to begin if your business is just starting with esg and why esg actually correlates to strong business performance and outcomes let's make a social impact [Music] so today we've got two great guests my first guest who is my co-host she is erica graham jordan she's the regional vice president here at benevity and our special guest today his name is dave stangus who is the chief sustainability officer with apollo and this is part two of our discussion on i guess the space of social impact awesome we're really excited to jump in and particularly start talking about measurement this is a question that comes up all the time so people often are not sure where to start right maybe they're new to sustainability when they think about esg overall they're oftentimes looking to say where do i go how do i even get this going so kind of the part a of the question is what's the best in class way to start tracking measuring and refining some of your esg programs yeah measurement is critical and it's it's really the place where everybody should start i think in every role i've had it's one of the first things i dig into like what do what do we measure as a company what do i know right what can i glean from that what insights can i get and where are there gaps because there's all the best companies in the world have gaps in terms of measuring these kinds of indicators esg non-financial related indicators and even if they measure some of them in the maybe they measure energy right because they're high energy uses or they're paying energy bills there's gaps somewhere else water or waste or you know supplier or consultant um footprints things like that and the social impact the human capital piece of it is even harder right there's always some measures in hr there may be some measures in the community group around volunteerism donations but i would say job one it's almost kind of job one two and three as you're doing parallel work when you start into a role is really understanding what you have what are the gaps um you really can't plan you can't make good decisions without good data so getting the data that you have understanding where the gaps are and then starting to really categorize it right i think that the sophistication of the requests that we're getting for data and transparency are growing every day um every year competition in the space right people are competing on transparency now so i do think it gets you know on the environmental side i say i try to tell people try to start with your core in the wall energy water and waste you can always expand from there you can then categorize it on the people side it's sit down with the hr department or the human capital department and really understand what they measure what they don't where they you know there might be some reluctance to disclose all of the data that they do measure but figure out what they measure you know turnover investments in employees training hours all of these things that help you tell a better story then you can start looking at you know baby supplier diversity spends you know what's happening in our supply chain but really just try to get a good sense most of these companies have programs that have been around a while so there's things that are in there that you can pull from but there's always new demands but getting that baseline is like critical that's helpful i think and then when we think about even part b of the question it's kind of multi-pronged right so i heard some examples of kind of e and s so maybe are there other examples on the g side that maybe a foundational company could start measuring and then when we think about how to advance those what are some advanced areas so if they think about what's my long-term goal um what are some advanced metrics that i can think about two three five years down the road yeah so i think you know to touch on the gps first before we get to the advanced metrics a lot of it is just sitting you know it doesn't take a long time but if you stop for a few minutes or stop for a day and think about how do we manage all of this work right how what's the organizational structure how were decisions made how would i communicate to an external audience the role that the board plays or the ceo plays and where where it plays out in the front on the front lines who owns it not by name but by function those are the governance pieces what policies do i have in place what are the expectations for my sector in terms of external statements on policies right there may be a gap you know maybe you have an environmental policy but you don't have a human rights policy or an anti-slavery or a forced labor policy maybe you're in the food business and you don't have an animal welfare policy or a sustainable agriculture right so governance is a lot about the the codes of conduct the expectations set inside the company but also for our partners and also then how decisions are made and it's it's again it's always a challenge to get all this information especially if you're new or you're coming into a new role but you can also get a pretty good sense by taking a look at the leaders in your sector and figuring out what they disclose and you know adapt and modify and build some stretch metrics for yourself i think the advanced metrics in all these cases are just like i said start with your operational footprint right like energy water waste you know people numbers diversity equity and inclusion gender ratios um kind of cultural ratios then your then you start to think about you know in the advanced side on the on the people side you know what about hiring what about retention what about gender and diversity ratios within certain cuts of my organization maybe leadership how many women in management positions what's the turnover look like culturally and racially right how many are we hiring how many are we losing what's the cost of replacing talent when they come in right so on the environmental side it's it's all the different cuts right it's if you're talking climate it's scope 1 scope 2 scope 3 what's happened in my supply chain on waste it's not just how much waste it's how much is being recycled where is it going what are the breakouts how much is hazardous how much is solid waste right um how much can i recycle how much is going to the landfill where is everything going and the water is the same way you can segment the sources am i pulling from a municipality or a surface supply or a well and where you can the advanced metrics are where you really get some of the insights and you really can drive change inside the company but you can't get the advanced metrics if you don't have the baseline right and on the governance side it's the same thing it's you know where the next cut of governance is the how here's here's the structure but here's how decisions are made this kind of content is reviewed at the audit committee of the board of directors this kind of content is reviewed in a sustainability committee at the board of directors this often here's the metrics here's the score cards we use here's how we factor this into incentive compensation or recognition um it's the it's everything that you want to know once you have the baseline data so if you put yourself in an investor shoes or even in a new employee what else do i want to know about the company kind of leads you to the next level of metrics or where can i really either save some money or build the business let's dive a little bit more into the metrics like what are the esg indicators um we've touched a lot of them carl but i think that you know without listing the 160 that you could be in there you know i think that taking a look at some of the frameworks might help right so if you're if you're thinking about the metrics taking a look at the existing standards in the global reporting initiative which really that line by line asks what do you measure what do you report what do you measure what you report all in the social and human capital all in the environmental and it really comes down to kind of mapping you know i would say capital flows you might like the natural capital or the human capital framework you might be thinking about it in a different way but if you're thinking about all of the people flows in the business what could you measure right hiring retention performance training investment right you're investing in this capital what are you doing what's the return um all of the demographic data right both inside your business but also in your supply chain maybe even in the way you bring your work to the community on the environmental side if you start with the three basic ones that i mentioned energy water and waste you can continue to cut from there right you know packaging reuse um partnership different sources of energy renewable right geothermal hydro electric um it's it's all taking that down and the same thing in the governance it's all about the how it's what policies do we take literally physical you know written drafted not only then do what what do we disclose but then the next cut is do we train all of our people do we train all of our suppliers so you can really go from 10 metrics to 50 to 200 pretty quickly um and then where the world's going is you know what metrics are you taking out to your value chain you know how are you measuring maybe perhaps how your customers or consumers are using your products what happens to them at the end of life and also what are you doing with every one of your suppliers right do you have codes of conduct for your suppliers are the transparency standards for certain materials if i have certain inputs you know a food company or a heavy materials company around you know conflict minerals you know am i tracking all of those things am i tracking the ingredients where they come from and all of the agricultural inputs or sustainability inputs think of apparel right you know how transparent is my supply chain in um apparel or luxury goods is there are there human rights issues are there labor issues in the supply chain there's lots of great sources out there to take a look at the b corp impact assessment it's another great tool to take a look at metrics something like the dow jones sustainability index right there's there's outside tools that will help you get a you know even more of a magnifying glass on the kind of metrics you can look at in your company how um and how often should a company actually review their indicators whether to you know to assess how well they've been doing or maybe they're at a point now they can add you know like as you mentioned you know starting with energy water and waste and waste but like you know maybe it's time to add new indicators because your company has evolved and and become more a little bit more sophisticated in their measurement sure i mean the the way to think about this is at a minimum this is an annual process for external stakeholders investors people that are looking at the data rankers and raiders but where you want to make actionable movement where you want to use them as strategy where you want to improve it could be a completely different cadence right if i'm building operational metrics you know material flows energy water waste i want my you know manufacturing leaders my supply chain leaders to be able to decide right or make decisions based on you know perhaps not real time data but data that's actionable right i don't want my company to wait a year to get the data that they you know here's how you did last year all right now let's make changes right so so maybe you want your operations or your your human capital people to get quarterly snapshots of where you stand or what's happening the board might want updates twice a year so you might have to take a cut of a certain set of data for your board of directors to report out right but at a minimum it's an annual snapshot of kind of the global performance of the company especially if you've taken public commitments or goals that you're reporting progress to but ideally wherever you want to drive operational change and this could be either you know think manufacturing is easy because you can kind of visualize you know we're making things we want to optimize that we're purchasing products we're converting them but you might also have hiring cycles right that maybe you do two major hiring cycles in the year where you know you're picking up talent that graduates new talent or then you're bringing in senior talent in the fall these are times where you're going to want to monitor those metrics and learn more often than once a year so think about them both from a reporting disclosure perspective but then an operational decision making perspective to drive the timelines and can you share a little bit more about the esg ratings yeah i mean um there's many many many now i mean almost every week or month a new one comes out i saw um in the time frame that we're having this discussion i've seen the newsweek most responsible companies come out a few weeks ago um just this week the just capital right the their top 100 but they also i think scored 980 or 990 close to a thousand companies the the thing that's interesting is there's so many of them as a company you have to decide you have to prioritize um and you have to pick you know you can pick 10 if you want you can pick 20 or you can pick two and and start figuring out like these are important to us for what reason our investors pay attention to them our our employees care about them our board of directors is interested in them or they're really good tools to drive improvement i know when i started this work back at intel and even took it a little bit to campbell i would pick a really good operational strategic ranking in rating and i would pick one that was more focused on disclosure and transparency and they were my two primary drivers right so i might pick the dow jones sustainability index to drive strategy and operations in my company and i could kind of divvy up that that ranking and the rating methodology and i could take it to hr teams and finance teams and supply chain teams and operations and they could all think about all right what do we want to improve on this year to make us better as a company and there's other ratings that are a little bit more taking a look at what you disclose right like the best corporate citizenship list was always a great example of what do you do and where can i find it on a public website right so it was always challenging to figure out all right now what part of this work are we going to disclose and um some people spend time focus on you know the the best places to work because they're focused on culture and talent and so they'll set up a team to focus on those um i personally have always overweighted investor surveys and rankings because these are things if my company's going to get ranked and rated or another company is going to sell research on my company to an investor whether i engage or not i want to make sure that that information is accurate i want to make sure it's up to date i want to make sure our best foot is forward in these places so i've often prioritized those rankings that happen whether we engage or not right you know so i think that um thinking about internally the strategy and then thinking about the stakeholder demands or interests in the ranking and rating and then prioritizing from there you don't have to do you don't have to prioritize 100 to be good at this you can pick a few and focus on those and it will have you know multiplier effect so we've been talking about measurement we've done we've been talking about metrics but can you tell us why esg is important right because we're what a couple months well several months away from the the 26th climate meeting and we know what will happen if we don't do anything so where should companies actually start um and if we don't know where to begin where should we start yeah i think you know there's two ways to come at this right one we talked about right is what do you measure today and and what information do you wish you had right i think it's a really safe you know place to test your thoughts and to talk to your leadership about like you know and after you've done your baseline here's what we measure what do we wish we had right what what other information do we wish we had to make better decisions it's a good way to focus on your own internal value proposition as a company um in order to be more agile to be just to make better decisions but i think the other big driver and probably what more companies are paying attention to today is the external demands right whether you're a public company or a private company you're being asked about just a reign you know what's your position on you know diversity equity and inclusion how are you you know how are you making sure your employees feel welcome and that they can bring their whole self to work there's new talents asking this when they come to do an interview right or other people communities may be asking you know what how are you going to be a good corporate citizen are you going to invest in the community are you going to give back um but i think that the the main external world of investors in terms of capital flows and investment these people are looking at risk number one are you doing the right things to manage risk are you watching your resource issues energy water waste right do you have any um issues in your supply chain that can harm you from a reputation standpoint and hurt my investment right are there are there labor issues in your supply chain are there controversies in your supply chain or their deforestation or biodiversity challenges right are there things you're buying in your supply chain either from a location that's a high risk or a high reputation or from a from a person or an entity that's a problem right so thinking about it from the risk management side but then adding on what story do i want to tell right what do i know my customers are interested in like we talked some of the examples you can see every sector pivoting a bit right i have friends in the apparel sector that are talking about reuse and recycling organic materials um traceability you know knowing where this comes from the traceability goes over into food right and cosmetics things that you know are on me near me right these are things people worry about where they come from um how they're how they're made so thinking about these things what does what information do i need to make the best decisions and then what are my most important stakeholders interested in and it's kind of it assumes you know the answer to that second question but a lot of companies don't right they haven't gone through a material materiality analysis they haven't really mapped out their stakeholders and their influence and how noisy they are and how much you know how much leverage they have so that's an example of another exercise that can help you determine which metrics are most important as we think also about just the the financial impacts right we see correlations between high esg scores and better returns um in your role at apollo i'm sure you see this and kind of when we think about it are there certain um uh indicators that are high more highly correlated with higher returns how should people be thinking about it right because i think there's also um so much information out there that people don't always know where to focus in in terms of is it one thing is it many things is it a category of things when we think about the impact of financials especially as we think some c-level execs might not get it yet but if they hear the financial impact then they start getting it as well yeah it's it's a great point eric and i think that the data has gotten much better in the marketplace about the correlation and sometimes the causation of strong esg both metrics and performance and value either to the market cap which is the stock price or you know to to growth and innovation and competitive advantage so again at the risk of kind of restating things i think that the thinking about the financial impacts are it's important to focus first on risk right there's a lot you need to play defense from a risk management perspective before you can play full offense you can do a little bit of both but you need to make sure you're managing the risks in your supply chain right because the value of companies especially if their brand right if i if i ask you to name a company you're going to name a company that has a brand that you know or recognize or use the intrinsic value or the kind of the market value of these companies is you know 60 percent reputation these days on average and more right so you know if you sold the company off just sold everything it owned and all its assets that you'd call that book value but the value the the stock price or the reputation is much more than that and it's all reputation it could be talent right could be innovation could be products but a lot of it is just core reputation of the company so making sure that you've got a good sense of risk and you're thinking about it right you're looking at enterprise risk you're thinking about all of the supply chain esg risks right just thinking across the board but the value then then you really start to think about what is most important to the business how does my company make money right so is where does money come in what are maybe i have higher margin products i have you know maybe hero products that if this went away the entire company would be in trouble right i mean you think of think of almost any company and there's really core products they make right i mean apple it might be the iphone of certain car manufacturer it's you know one of their tour you think of ford motor company the f-150 pickup right i mean that's that is their bread and butter um every company's got things like that and understanding that business acumen then you start to focus on the opportunity right so where do we start to you know manage the risk but then let's talk about the value proposition not only in terms of performance but of environmental right this is better for the environment right this we build this we make this thinking about the suppliers and what they bring to it here's some stories about our supply chain and how we think about it and how we build up the people in our supply chain or how we work with the communities where we build or make this product or deliver this service it's it's it's marketing it's branding it's reputation management we used to talk about this many years ago about protecting the brand and building the brand whether the brand is a company or the brand is a product that's how you derive value if you think about value creation and actually test yourself you know we're going to launch this great new thing right it's uh all of our employees are going to go off and do this thing and you actually ask yourself hard questions how is this going to drive value how is it going to increase the value of either the company or the product if you can't come up with an answer you either haven't really thought out the plan or maybe you're not picking the right strategy right so i think we need to be hard on ourselves because we need to be communicating it to our cfo or ceo because they're going to be asked you just invested 100 million dollars in this cool new thing mr cfo how was that generating value for me as a long-term share owner and i think that's a good question to be asking ourselves um because if our finance people our cfo can't explain it then we've failed we need to equip them with that answer so dave we could be talking here for a very long time but if our audience um wants to connect or reach out to you where's the best place to reach you yeah the best place is either on twitter or linkedin i actually try to use those platforms in different ways putting a little bit more of kind of data pieces and thought pieces and jobs i'm seeing on linkedin and then using twitter for signals that i'm picking up in the marketplace around esg so the uh a lot more kind of little short things i'm seeing other companies doing or um stories or data on twitter um but a little bit more about the profession right how are we as a profession leading and changing on linkedin but those would be the two best places and check out part one of our discussion on esg with dave stangus in this video here thanks for watching and we'll catch your next episode

Channel: The Social Impact Show

Views: 55,416

Keywords: environmental social and governance, environmental social and governance (esg), environmental social and governance (esg) criteria, esg, esg measurement, esg metrics, esg metrics for sustainable future, esg rating, esg rating methodology, esg ratings explained, esg reporting, esg sustainability, external data, sustainalytics esg, sustainalytics esg ratings, esg investing

Id: miWyDREm4QI

Length: 24min 47sec (1487 seconds)

Published: Fri Feb 04 2022