Episode #141 - Decoding ESG and its Impact on Business Dynamics

Transcription:

Sean Riley:

With all the fancy introductions out of the way, welcome to the podcast, Tracy.

Tracy Taszarek:

Thank you very much.

Sean Riley:

You spoke on ESG, and I guess for our listeners who aren't familiar with it, could you give a brief overview of ESG, what it is, what the letters stands for, and then, I guess how it's different because a lot of people might confuse it with EHS?

Tracy Taszarek:

Absolutely. ESG stands for environmental, social and governance. Overall, it is a way of looking at how a company, in a sense goes above and beyond what they do for compliance and actually looks at how they're impacting the environment, the community around them and their employees. It's not just that compliance piece of health and safety. It goes beyond that to talk more about impacts to-

Sean Riley:

And that's with the EHS is more of a compliance issue?

Tracy Taszarek:

Correct. EHS, we're looking at rules and regulations, for example, OSHA and EPA. They put rules in place to keep our environment safe and to keep our employees safe. ESG knows we're being safe under EHS rules. Now, how are we impacting everything beyond that?

Sean Riley:

So when you were just giving your presentation at PMMI's annual meeting, you said that ESG is about a new way of doing business. And by saying that, what exactly do you mean? And I think you might've mentioned three specific pillars that kind of build upon that.

Tracy Taszarek:

Correct. The new way of doing business where in the past or currently we may be looking at how to keep a business sustainable and profitable, so we're looking at safety, quality, and efficiency, this new way of looking at business is looking at how to keep a business safe, efficient, and sustainable. So we're adding in that sustainable piece and how companies can continue to grow and improve.

Sean Riley:

With that being said, I see ESG a lot now. Why is it so popular?

Tracy Taszarek:

Why is it so popular?

Sean Riley:

Yeah, what is it that's made ESG the hot ticket item?

Tracy Taszarek:

So ESG used to strictly be focused on evaluating a company for financial reasons. It was a set of standards that financial experts would look at to evaluate a company and how they would make strategic investment strategies. Now we're seeing more and more stakeholders get involved, stakeholders, not just on the financial side, stakeholders that would include consumers. Stakeholders include the people in the community around a business. So more and more people are getting engaged and are more interested in what a company is doing and how they are impacting the environment and the world around them.

Sean Riley:

Is it a generational thing?

Tracy Taszarek:

It very much can be. We're hearing a lot about how younger generations are looking at companies that they want to support, that they want to work for, and looking at what a company is doing to improve the environment and how they're helping their employees, employee benefits and things like that.

Sean Riley:

One thing you discussed during your presentation was, and I know this is going to be a lot, so hopefully you'll be able to pull from your notes or something like that, but what are your seven steps to an ESG strategy?

Tracy Taszarek:

Our seven steps that we look at include sector and market analysis, current state baseline, conducting a double materiality assessment. Fourth is executive engagement, fifth is policy commitment and governance. Then we move on to a strategic roadmap and report progress.

Sean Riley:

Those are the seven things that you want to do if you're trying to implement an ESG strategy at your company.

Tracy Taszarek:

Correct. So those are the seven steps that our company works through with our clients and customers that we have seen be very successful in developing that ESG strategy.

Sean Riley:

We are an organization that really targets packaging and processing OEMs. And I know at one point you touched on what's the impact that ESG is having. I know that it's a lot of the CPGs are the ones that are doing a lot of the front-facing things that are ESG based. How is that impacting OEMs and how are they adapting to it?

Tracy Taszarek:

Sure. We're seeing more and more that requirements are coming out and companies are required to not only look at their own impacts on the environment, but they're needing to look at their whole supply chain. So they're needing to look at the suppliers that they use and how those companies are also impacting the environment. So they're looking at their scope 1, 2, and 3 emissions. They're looking at HR policies and how companies are managing their workforce, and they're looking at overall how companies and how the OEMs potentially are looking at their governance strategies.

Sean Riley:

And I think at some point you discussed, and I'm actually curious about this because everyone always talks about greenhouse gases and you said that there's scope 1, 2, and 3. Could you break those down for us a little bit before we wrap up?

Tracy Taszarek:

Absolutely. This is one that always confuses me as well. Scope 1 emissions are those direct emissions that your company produces. So if you have a piece of equipment that is emitting some sort of air emissions, that's a scope 1 emission. That could also include if you have company vehicles, the emissions that those vehicles are producing are part of your scope 1 emissions. So those are your direct emissions. Scope 2 would be your indirect emissions that are coming from energy that you purchase. So your water bills, your energy bills, natural gas bills if you are using natural gas. Those will all be your scope 2 emissions. So they're indirect, but still they're purchased by your company. Scope 3 then is everything else. So it's all of those emissions that come from supply chain. So it's looking at your logistics costs and emissions that are produced in moving your product from one place to another and things like that.

Sean Riley:

Perfect. Well, I want to thank you for taking extra time after the annual meeting to come on here and give us a little breakdown on ESG. So with that, thank you, Tracy, for taking time with us today.

Tracy Taszarek:

Thank you so much.