Isobel Wild [00:00:07]:
Hello, everybody. Welcome to the State of Sustainability podcast brought to you by altruistic. We are just off the back of our flagship event in Chicago. We hosted around 70 food and beverage sustainability professionals, all working on sustainability data challenges in the agri value chain. We had a whole spectrum of brands, from ingredient suppliers to food brands the likes of Mars, Kraft, Heinz, McCain's, and also retailers. So Starbucks, McDonald's, Aldi. It was a proper mixing pot of pretty bold professionals, if I say so. But as you can all imagine, some really interesting trends emerge that we want to highlight to you and also reflect on.
Isobel Wild [00:00:50]:
So the first one is action first, reporting second. The second is around the qualities of the best kind of decarbonization initiatives. And the third one is around how data transparency is very different between b two B versus b two c. Before we get into that, Saif, how are you off the back of a crazy few days in America?
Saif Hameed [00:01:15]:
I'm good. I don't know if I'm exhausted because I'm kind of, you know how at a certain point when you're sleep deprived, you're just sort of running on ethic lactic acid basis where youre just sort of carried on. And at some point, the wily coyote running over the edge of the cliff realizes that hes run too far over the edge of the cliff, looks down and falls. I think thats the zone Im in right now. But whats been really exciting is that across our event, Sosi and across another event that im at this week, I think I must have met about 65 to 70 companies and the sustainability teams in those companies. And it's been just really fun getting to hear different perspectives. The US is a different environment to Europe, as you can imagine. It's not as different as some might expect.
Saif Hameed [00:02:04]:
I heard a lot of talk around how this sort of society is quite polarized and ESG is a dirty word. And there are different ends of the spectrum of opinion on whether sustainability should matter to business. All the sustainability professionals I'm talking to were actually consistent on most of the themes that they were talking to me about. I think that if I was talking about diversity and inclusion, it might have been a little different. I actually think that is maybe a more charged topic, and I think that the fossil fuel divestment side of environmental sustainability is a charged topic. I actually think that most of the stuff that we talk about seems to be much less controversial. That was an interesting learning for me.
Isobel Wild [00:02:52]:
Can you quickly touch upon the main points you were talking about in terms of the diversity and inclusion and why that is controversial?
Saif Hameed [00:02:59]:
Well, Izzy, purely because it's controversial, I would actually rather not touch upon it. I'm just kidding. I'll touch upon it very, very briefly. But then, in all honesty, there is some truth to why I wouldn't touch upon it. But I think that there's a perspective in the US that sort of woke culture has gone too far. It's invading the corporate space. It is reframing society in ways that make a lot of people feel uncomfortable. I think that there's also a generational shift that people are seeing and they're not sure whether it's happening for better or worse, and they're concerned about the world that their kids are growing up in.
Saif Hameed [00:03:36]:
And I think that plays both ways. And so one of the things I heard, for instance, recently was that a company I was speaking to is bringing together the ESG managers in the company, and it's, let's say a company of a few thousand people. And they found lots of excitement for people to come together and engage in environmental sustainability. But they had someone write into them and say, look, I'm happy to come and engage in all the environmental stuff, but if we're talking about Deni, then I'm just not comfortable on that topic and I don't want to discuss it. And so I'm not going to be there. So can you please confirm to me that that's not on the agenda? And so I think that's kind of interesting, because when I hear people here in the US play the other side, they say, look, Deni is about access to the best talent and it's about access to perspectives. And those two things are good for business. And so the language here is very much about framing this in terms of how it's good for business, less about whether it's fair, let's say.
Saif Hameed [00:04:41]:
And I actually think that's the right way to frame it. And to be honest, that's the way that we frame it. Izzy, in our business as well, we don't say, hey, we want to build a diverse team because it's the right thing to do or because it's fair to society. I don't think we ever would because we're a startup. We're in a darwinian environment where you kind of have to survive, as any startup does. And I think that we try and do the things that are best for our business and in our business, as in any other business, bringing together a diverse range of perspectives, accessing the best talent, wherever it may come from, that just ends up being. And there's good data behind this that ends up being good for business. Incidentally, in a past life at McKinsey, I was part of the diversity, equity and inclusion service line and contributed or wrote a couple of the reports on this.
Saif Hameed [00:05:32]:
And it was quite interesting to see the correlation between business impact and a focus on building diverse teams. But more on that, maybe in another episode.
Isobel Wild [00:05:41]:
Yeah, I think it also builds into the fact that every sustainability strategy does have the diversity and inclusion branch to it, especially in the communities and engaging and empowering them. But then we get into a room and everyone's talking about carbon. That carbon tunnel vision is a serious thing. But let me take us on to our first topic, which is the action first, reporting second. So this came up throughout the day and there was a general consensus that standards and regulations need to catch up, whether it be the land sector removals guidance for accounting for inserting reductions, or EPR packaging regulations, or even product labeling, everyone was saying that regulation just isn't moving fast enough. So the aim is to, for many companies is actually get going, go on what they know, go on logic, and then back solve for regulation later. Saif, I would love to get your thoughts on what this approach is.
Saif Hameed [00:06:46]:
Yeah, I'm actually going to disagree with you, Izzy, in that I think that was the spirit of the discussion. But actually I think that where people were landing was that they're actually going to hold back on action because of standards. So I think there was a general feeling that the lack of alignment and consensus on standards, lack of certainty on standards and SBTI, we're looking at you. But also, frankly, if you look at the guidance from the greenhouse gas protocol, it's chronically late. If you look at the SEC regulations, there was back and forth there. If you look at CSDD, there was back and forth there. Just this whole maelstrom of uncertainty does make business very reluctant to go big just because they don't know what they might have to prioritize. And they also don't know how that might play out in their numbers and how that may play out in what they need to report.
Saif Hameed [00:07:43]:
And so while I think there were certainly voices in the room saying, look, act first, report second, act first, and worry about standards later, I think that was kind of a lament. It was like, oh, the world would be amazing if this is what we did. But, you know, wink, wink, nod, nod, we know we're not actually going to be able to do that. And maybe wink, wink, nod nod is a bit the wrong expression because I think it was, you know, it's definitely not what the people in the room wanted to be doing. Like, the people in the room definitely wanted to be taking action as individuals, but they also knew that it was probably not in the best interest of their company for them to be first movers. And I think there's just a lot of like, I think there was a moment maybe where even the largest companies and the incumbents were excited at the idea of being first movers. I think everyone is now landing in. We're pretty comfortable being a good fast follower.
Isobel Wild [00:08:40]:
So if we take reductions in insetting, as an example here, the SBTI flag targets are a thing and people have set them. But the GHG pro school guidance to go alongside that for how you can account for these reductions, aren't there. Would you say you have the same judgment there or do you think. I got the sense that actually people were moving on these because reductions are such a value capture area and we're actually going to go and back solve for it later. Would you agree or still disagree?
Saif Hameed [00:09:14]:
Yeah, a bit of both, Izzy. So definitely there were companies in the room with us that were taking action and were investing in land based sequestration, were spending on insets. What they also told me, and I dont know if they did this in the big room or in the side rooms, lets say, but they also said that they have no idea what this is going to mean for their numbers and theyre not accounting for it in their numbers. So theyre kind of doing, I think partly because it builds, it is actually interesting why they're still doing this. In my hypothesis, they're doing this because it builds better relationships with their suppliers. It's a good thing to experiment with because they'll have to do it later. So they might as well learn the ropes, really, in terms of how this works, how this plays out, how pricing is going to look, what types of projects make sense, all this experimentation makes sense to do now at a smaller scale. These are the reasons why they're doing it now.
Saif Hameed [00:10:08]:
They're not doing it because they're going to see a reduction in their scope. Three, because right now they actually have no way to connect the dots. In many cases, the projects that they're supporting are projects taking place in organizations that they don't directly buy from. They buy from intermediaries and maybe intermediaries upon intermediaries. And so they're kind of able to say, look, there's a group of farms out there, and Izzy's farm is one of those. That group of farms, we don't know, if we're buying from Izzy directly, but there's a reasonable chance. So let us go out there and do some good work with Izzy on Izzy's farm.
Isobel Wild [00:10:42]:
Yeah, I think another piece that I want to pick up on in this reporting sphere is that as we had a whole range of businesses, there are lots of different people at different points on their sustainability journey. And I think another feeling that is probably widespread across all of our listeners is that there is too much time being spent on reporting versus actually on the action piece. And there is an anxiety around putting real money on and making bets on data that they don't trust or spend based or assumption based data. In your opinion, what are the best ways to actually change this resource allocation skew to move from that reporting piece to the action piece?
Saif Hameed [00:11:22]:
Yeah, I think that in most businesses, it's not actually a resource allocation problem between the two. I actually think most businesses will find that they just need to ramp up spending on both. In some of the large businesses, this topic has been a well trodden topic for a few years, but they're still ramping up the resource pool across both fronts. And so I sadly don't think that we're going to be in the world where resources get transitioned from reporting work towards action, because I think that the reporting load is also going to rise, for better or worse. And there are elements of both that's going to rise and the action work is also going to rise and has to rise, basically. So I think that everyone in the corporate sustainability space just needs to accept the new normal, frankly, which is that there is going to be a lot more work here and there are going to be more resources needed. I think that what is going to be true, though, is that I think that the mind share of executive time that right now goes towards reporting needs to shift towards action soon. And so there are companies that I've been speaking with this week that have been gathering data for three years or have not yet been able to set targets because it's taken them three years to get on top of the data.
Saif Hameed [00:12:43]:
And the reporting load is going to be another big load. And you particularly see this in companies where maybe they're doing about four, five, 6 billion revenue or so, and they have a one person, two person sustainability team where that team is basically just swamped with reporting and data gathering. And frankly, as soon as reporting seems to be something they've got a handle on, there are new standards they need to report against. And one of the interesting things here in the US is that because of the sort of the federal system, you have every state coming up with its own regulation as well. And I had one anecdote. Someone was telling me, and I forget some of the details, but they said in California there was a regulation introduced for testing for a particular particle in the product that they were selling. And they were unable to test that product in California because the air in California had a higher level of that particle than what the testing requirements required. And so they actually had to take the product to a different state, test it there, and then sell it in California.
Saif Hameed [00:13:46]:
I think that everyone in the corporate sustainability space would welcome more standardization in regulatory requirements. On the investor side, I was in a panel discussion yesterday with a couple of large banks and a few of the other big institutions at the cross section of public markets and private markets. And what I was hearing is that it used to be the case that public markets had a higher bar for sustainability reporting and ESG reporting, and that was more onerous for companies versus private markets, where you're raising money from funds. Whereas actually now what I'm hearing is that it's actually more onerous on the private market side because every fund has its own requirements. Every limited partner investing in a fund or in a fund manager has different requirements. And actually in private markets, everyone feels at liberty to set their own requirements. And so thats not the regulatory reporting side, its the investor reporting side. But it just gives you a sense of just the overwhelming nature of what corporate sustainability professionals are having to deal with in reporting in general.
Isobel Wild [00:14:56]:
Yeah, it sounds like its a global strategy with local implementation. I mean, be that across geographical, but also across regulations, across everything. No mean feat, perhaps. Let's go on to our second key theme, which can be less daunting and more actionable, which is across the room. There were some great suggestions on what actually are the qualities that make a really good decarbonization initiative, and I'm going to highlight two of them. And Saif, I'd love for you to weigh in on any other suggestions you might have. I think a really interesting one was actually how to set up and frame relationships to make these initiatives happen. There were two kind of setup frameworks which should happen in tandem.
Isobel Wild [00:15:44]:
One is like a vertical relationship. So for instance, connecting suppliers with customers. There's a really good example of a supplier passing funding through to their farms from their customer. Another one is horizontal. And these are practical and interactive ways for farmers, for instance, to learn practices from each other. There was a funny anecdote where it was actually like, just get the few farmers together around the boot of the van and have a few beers and share what works and what doesn't. But other suggestions will run workshops, have fairs, show and tells, all those kind of things. So I think relationships is one bucket and then the other bucket, which I think was overwhelmingly apparent, was deliver competitive business value.
Isobel Wild [00:16:32]:
And this is how you run them, but also frame them within your organization. So this can be like financing mechanisms. There's really cool suggestions around third party financing opportunities. Example, not from the event, but another example was H and M actually distribute dbs, this finance, which is a singaporean bank, into their kind of reduction initiatives. And then another area is like the innovative opportunities that can come out of these reduction initiatives and the partnerships you can create off the back of those. So whether that be a low carbon product range or partnerships to kind of reuse your waste materials. Saif, I'd love your thoughts on those and perhaps some other key qualities that you saw.
Saif Hameed [00:17:17]:
Yeah, I mean, I think what I'm finding really interesting is that with sustainability, we're basically seeing the setup of a new business function. And as a result, there is not really that much practiced wisdom, and there are not those synapses through which information flows and best practice just becomes a generally accepted norm. If you look at, let's say, conventional financial accounting, best practices been around for literally centuries in some shape or form, it's sort of evolved. And in sustainability, we're seeing the need to kind of do all of that in about five years, really, and have every company go out on a limb and effectively commit publicly to targets that require them to incorporate best practice. And thats increasingly true, not just for the largest companies, but also for midsize companies. And so I think what youre kind of seeing is a push towards an idea of, like, what is the simplest way for us to transmit information. And I love the example you cited of the boot of the van, but what it really emphasizes is you want your sustainability interventions to be simple enough that they can travel through word of mouth in an audience that isn't really thinking about sustainability, but is just thinking about what maximizes the next yield for me. And I think there's something very powerful in that, in that sort of, what is this insight that can become practiced wisdom? If you think about how this has worked for the last 2030 years in business in other areas, I like to take the example of digitization, because digitization was also a sort of disruptive trend.
Saif Hameed [00:19:02]:
In some ways, I think there are good parallels with sustainability. And if you sort of think about when digital functions came into being. I think this is around 2000, 1314, I'm going to say. And I really found that you had maybe two big drivers for how insight around digitalization was cascaded across business. Maybe three. One was you just had people movement from company to company. So you had people who became really good at it in a, let's say a Johnson and Johnson, and then move from a Johnson and Johnson to a smaller company or a different company, or move from a junior role to a senior role. And you just have this kind of lateral movement of people across organizations.
Saif Hameed [00:19:41]:
And that meant that wisdom developed in house, in one company went to another. Another big driver was consultancies, both the big ones and the boutiques, the system integrators and the smaller, let's say, loan person, project managers as well. And all of those sort of agents also helped cascade best practice around how you do this. Well, think about specific use cases, solve for those use cases, don't solve for the whole business all at once. Don't just try and gather all the data you can and then figure out what use you make of it. Think about specific data that you need and then think about quality, like all of the kind of basic principles of how you do this. Well, you had these sort of people moving around in organizations. You had vendors, sorry, consultants and advisors, and then you also had vendors trying to sell you something and to be able to compete effectively, you had different vendors saying, well, you know, here's the insight, here's how you should do it.
Saif Hameed [00:20:36]:
Whether you do it with us or whether you do it with someone else, here's what best practice looks like. And we want to play that role of trusted advisor. And even with all of this, I think that digitization has been a very incomplete transformation in almost every business, and certainly in business at large. Like the businesses that have gone big on digitization have probably not gone as big as they would have liked, and they are still a, you know, frankly, I think a minority of businesses that have even tried to do this well. And you see across the business spectrum, globally, just so many businesses that have not even six, seven years, eight years, ten years in to the digital sort of wave have not actually made big inroads. And so even with those three big boosters, it's been slow. And this is a long winded way of saying maybe, Izzy, that I think here we kind of need more faster. And so it's going to be a combination of the same three things that I've described.
Saif Hameed [00:21:26]:
I think we're seeing a lot of podcasts, a lot of content going out there and I think we also now need to figure out how to make the insight simple enough that it travels very nicely, very smoothly across organizational boundaries and individuals in a way that someone can share an anecdote and it makes sense to someone else. If I tell a random person like methane inhibitors is a really interesting concept, that may not get me so far, but if I say, actually, by the way, did you know that with COVID cropping you can get more productivity out of the soil and actually more yield? And by the way, apparently it's great for the environment. Also that I think is maybe a simpler way for insight to travel.
Isobel Wild [00:22:09]:
Yeah, and I think there were a few mentions on the day around don't miss the opportunity of a good crisis. So it goes down that general gist of no pr is bad pr. If something does go wrong, and we've spoken about it before, like actually put your hands up and say this went wrong. But let's use this as a valuable story to make this example travel so other businesses or don't make the same mistake, for instance. So I'd agree there is value in that storytelling piece onto our last but important key theme, which is around data transparency and how this varies between b two b companies versus b two c companies. I'm going to take the example of a product carbon footprint to contextualize this key theme. First, onto the b two C side, there was a general assumption that large consumer good companies actually don't believe that on the pack sustainability claims work and sustainability products actually perform poorly. This is primarily driven by the fact that their consumers are price sensitive and don't generally care about sustainability.
Isobel Wild [00:23:21]:
Despite what they say on the surveys, the reason for product carbon footprints is actually for internal decision making purposes versus external brand presence or equity with their customers. On the flip side, for B two B companies, there is a really strong pull from customers to share their product level data, and from the companies in the room, having this level of data granularity sounded like a great commercial opportunity. There were numerous examples of using this data to encourage conversations around unlocking finances from suppliers to distribute at funding level, but also just to add more weight to that relationship. Saif, what's your read on the variation of use cases and data transparency?
Saif Hameed [00:24:04]:
In this case, it's an exciting topic and I think it's going to be an exciting topic for some time. I have two sets of insight here that I'm relying on beyond what I heard in the room. One is the surveys that I've read through and the Nielsen IQ. One that was published, I think, now a couple of years ago is one set. There's been some good research done by others, including Bain and company and a few other organizations as well, I think. And actually, I think the evidence from the survey suggests that consumers will tell you that they do value sustainability claims on PAC. There is actually also some good evidence to suggest that products with sustainability claims on the pack do better commercially. I think that what is less clear is whether there's some correlative element there.
Saif Hameed [00:24:52]:
So are the most popular products, the hero products, the products that sell better, also products that are most likely owned by companies that are more likely to put sustainability claims on the product. That's one aspect. If you think about oatly as a good example, you could say Oatly has a sustainability claim on the product. And that's why oatly does really well. But also oatly is really, really good at marketing and has a product that is simple and has a good distribution model. And they've also managed to tie. It's not even that they've timed it well. They've been around, I think, since the early nineties in one shape or form.
Saif Hameed [00:25:28]:
But it's the right moment for oat milk. And oat milk is having a big high right now. And so there are many reasons why an oatly might actually do really well commercially and incidentally also have a sustainability claim that is a nice way of being consistent with the overall brand. So I think theres that one aspect that you cant actually separate the correlation from the causation. In this instance, its quite hard. The second is that what I hear from business, and ive spoken with some of the largest consumer goods companies on this, is that it doesnt matter what claim they put. In some cases they have even experimented with putting somewhat random claims on products in different geographies, and they find that it's the same, like it's the same uptick, where they see an uptick. The uptick is undifferentiated by the nature of the claim itself.
Saif Hameed [00:26:15]:
It is just any claim does something good, basically. And I think that's kind of an interesting aspect. One of the most insightful sets of data I saw suggested that actually consumers in emerging markets like India, Malaysia, Indonesia also value sustainability. And I think it comes from a sense of quality and wellbeing. And I think that having more sorts of claims on the product to many consumers signal there must be more quality here in this product. So I think thats kind of one set of insight, maybe just to bring out and then, Izzy, to bring it back to your observation, I do think that right now the risks for b two C companies of putting a claim on the product seem higher than the upside. Certainly for the incumbents. For the big brands, you're not a challenger brand.
Saif Hameed [00:27:04]:
Your numbers are likely not better than average simply by virtue of the fact that you are an incumbent, you are the average. And that's not a bad thing. It's just the nature of the space. You're not really going to benefit from putting numbers out there wholesale. You might benefit from putting it on certain brands and certain products where you are a challenger and looking to get market share, but it's unlikely you'll do any kind of gain from having this across the board. Why do it? Because you still have the net exposure of risk. Retailers are asking you for it, but you're also afraid that retailers are going to use this against you. And there are actual examples that I think were shared with us last week, or which I've heard otherwise as well, which is where companies have taken their best innovations to retailers found a lot of excitement and immediately found the excitement was actually because the retailer wanted to know how much cost would go down as a result of this great innovation.
Saif Hameed [00:27:54]:
And that just doesnt help. And I dont think retailers are aware of just how much that doesnt help. So thats something we see on the b two c side. On the b two b side, as you say, is its a much more dynamic playing field right now. And actually a lot of b two b sellers are finding that a claim or a label, not so much a physical label, but a product carbon footprint, is looking like a really good way to differentiate not just your existing products, but in particular new product lines that you might want to introduce, new R and D that you might want to do to meet a new customer need.
Isobel Wild [00:28:28]:
Saif, those are great insights. Just to wrap us up, is there anything else from the day that you want to flag that you thought was really interesting? Were there any elephants in the room that you think would resonate with the listeners?
Saif Hameed [00:28:40]:
Actually, the biggest thing I want to flag is how important community seems to be in this space. I had a lot of people come up to me and say that they were so excited to meet this community of people and I think that the US is just such a huge country and so diverse and so spread out that I think there is a lot of value in having sustainability professionals coming together. I had someone telling me just yesterday or the day before that they've been cold calling their peers in other companies just to try and connect and share thoughts. And I think that's just, that's a really exciting momentum to lean into.
Isobel Wild [00:29:13]:
Yeah, definitely. I would agree with that. I think my key takeaway was perhaps more on the content side, but it was the emphasis on making it count and how to, you have to reframe all your initiatives to the business value and then, you know, work backwards from that and your approach to it, but also the importance of measurement and how measurement really feeds into making it count in the short term and in the long term. Saif, thank you so much. And I look forward to being on the same time zone as you next week. And thanks.
Saif Hameed [00:29:48]:
Yes, after a long time, a long time.
Isobel Wild [00:29:51]:
Thank you, listeners. And as always, please let us know if there are any areas you want us to touch upon and we'll feed it into future conversations. Goodbye.
Saif Hameed [00:29:59]:
Thanks, everyone.