Uncovering the Connection Between Social Impact and Environmental Sustainability

Read what we discussed

Karl Yeh (00:00):

My guest today is Michael Wong, he's the environmental sustainability manager with Ferguson. Thank you very much, Michael for joining us today.

Michael, there's the big buzz that's going around ESG, environmental social government. Maybe you can dive a little bit more deep into the E aspect, specifically I guess around GHG emissions. What should we understand about it?

What should be understood about GHG Emissions?

Michael Wong (00:53):

GHG emissions, I think the easiest way to think about it is it's broken up into two parts. You've got the direct emissions, which at Ferguson we call our footprint.

And then you've got the indirect side, think the supply chain.

So in the GHG protocol, which is sort of the corporate standard for how everybody should be measuring and quantifying their GHG emissions, they break it up into three scopes.

The direct one is scope one at Ferguson, this is our fleet fuel use, our natural gas that we use for heating, the refrigerant that leaks out of our HVAC systems.

Scope two is sort of just for electricity and that's an indirect one. It's got its own special category because you don't really generate the electricity at your own site. Most of the times it's generated by the utility, but it's still something that's sort of mostly in your control.

And then scope three is the other indirect sources of emissions. Think of that as your supply chain, both upstream of your company and downstream.

When consumers are using stuff that we use, there's 15 different categories of scope three, so it gets a bit murky about how to quantify them, but each company has the task of figuring out which of those scope three emissions categories are important to them and trying to manage and quantify them too.

On the upstream side for Ferguson, there's categories like procuring and materials that go into the things that we sell, the services we use, and then upstream transportation distribution.

The big downstream one for us is going to be use of sold products, so the entire lifetime emissions from the products that we sell our customers.

Scope three is sort of the hardest one to measure because it's not really clear where the boundaries are, but it's also a lot of times a company's greatest opportunity for action and incentivizing and promoting positive changes in the world too.

And that's sort of why net-zero goals and things like that are becoming more prominent these days.

Karl Yeh (02:53):

When you talk about these different tiers, the different categories, is this the same for all the other businesses, for all the other businesses looking to, I don't know, implement ESG or measuring their GHG emissions and so on?

I guess maybe a two part question. Is there a standard that all the companies have to abide by and are these usually the same measurements for each company or are they flexible in what they want to measure?

Is there standard reporting for GHG emissions?

Michael Wong (03:20):

Yeah, great question.

The GHG protocol is sort of the corporate standard. And then I would say for scope one and two, it's generally the same for all companies.

You do some collecting on the internal end about, for example, how many kilowatt-hours or megawatt hours of electricity your company used in a certain reporting period.

And then you would multiply it by emission factors from sources like the EPA or you'd collect something like gallons of diesel that you used this year and multiply it by an emission factor.

Scope three is where it might be different from company to company.

Again, you're trying to figure, for some companies if you're in the financial sector, it might be like, financial emissions is a really important category for other companies.

If you're in retail or consumer goods, use of sold products or thinking about end of life are going to be more material and therefore more useful to include.

Karl Yeh (04:13):

Another thing that's being talked about a lot is net-zero, right? How is that related to ESG? And maybe you can expand on that just a little bit.

What is net-zero, and how is it connected to ESG?

Michael Wong (04:23):

Yeah, so net-zero is one of those tricky terms that varies a lot and people use it in a lot of different contexts and it means a slightly different thing in each one.

But scope three and net zero are sort of related in that they think about the supply chain.

I'm going to start at a high level global then break it down to national and corporate.

The highest possible level, global level, net-zero is sort of the level of emissions inputs, outputs, being balanced, where we'll get global temperatures to stabilize.

The earth sort of naturally processes some carbon.

Right now we produce more across everybody, than is taking in, and so we're getting a little warmer.

At the national level a lot of climate science is being done by the UN IPCC, International Panel on Climate Change.

And essentially the big learnings are we don't want temperatures to rise higher than 1.5 C above baseline here.

And so in order to do that, the two benchmarks of emissions reductions that a lot of people are trying to keep in mind are 50% reduction by 2030.

The end of this decisive decade as a lot of people are calling it, and then net-zero towards 2050.

Countries have also set targets towards this goal of limiting warming to avoid the worst impacts of climate change.

And then at the corporate level, net-zero is sometimes referred to in different contexts, some companies say net-zero and they're talking about just their footprint, so their scope one and two stuff that's directly within their control.

Most companies think about net-zero in context of their supply chain as well. They'll set targets towards meeting those.

And that's why scope three is really important.

If we just think about leaders in corporate sustainability doing great work on their footprints, ultimately that's not quite enough.

We really need to gain some momentum and bring everybody along with us. If you've got the resources, the bandwidth, the expertise to be a leader on ESG, we want you to bring others in your sector along with you.

Karl Yeh (06:25):

Let's talk about social impact.

What can social impact professionals do within the organizations to impact the environmental environmental sustainability aspect?

How can social impact professionals impact environmental and sustainability efforts in their organization?

Michael Wong (06:35):

Yeah, I think there's definitely a lot of work to be done. As I said, it's this decisive decade where we need everybody on board and helping out.

And for ESG, they're under the same umbrella and there's actually a lot of overlap between ENS, that's why they're both there.

If you think about who's experiencing these environmental impacts like water stress, indoor air quality, it's people, climate change impacts humans.

And so having people who understand that side of things, I think there's a lot of interesting overlap you can find sometimes.

Yeah, I feel like when I talk about my job, it's always like, "Oh, thank you for your service, you're helping the planet."

But I like to think of it's also a bit selfish. I think the planet's going to be fine. It's us living on this planet that I'm worried about.

And I think action here helps everybody in the long run and it's not just a great thing for moral reasons, but also selfish reasons.

There's companies out there like BlocPower, who have found a really cool niche of helping multi-family residents in affordable housing units that have historically been under invested in and helping them out with building electrification.

That's a super specific use case where the S and the ESG are aligning, but there's only going to be a small portion of people at each company with ESG specific roles, sustainability focused roles.

But it really takes work across the organization and we do need that support and integration with everybody at the company to get there.

Yes, there are ESG roles out there, but no, you don't really need to be in an ESG specific role to contribute to the cause.

Some of your listeners may be familiar with Project Drawdown.

They've done some work to think about different climate solution levers, food waste or building electrification and comparing them and which ones will have the most impact.

I think they've put out a publication recently, Climate Solutions That Work, and they've broken down these key leverage points and climate actions for businesses.

Looking down those, I can give some examples from working at Ferguson how we've had to collaborate with other teams.

It's really a big team effort, not just our home team there. To start on that list a bit, there's emission reductions where we've been able to work with our fleet and facilities teams a lot.

There's the climate disclosure piece where we've been able to work with legal and investor relations, stakeholder engagement and collaboration.

That's a lot of work with HR, communications, social philanthropy, climate policy advocacy. If you've got a government relations program or your PR team can lean in there.

Products, partnerships and procurement. Three Ps, I guess, we've got category management, sourcing and procurement.

There's a lot of finance involvement on the investments and financing side.

And then obviously corporate leadership is instrumental in setting that culture and turning ESG into one of those issues that we think about every day and integrate into all of your business aspects just like you would do something like safety.

Karl Yeh (09:30):

Now, I know you touched on it a little bit. What are some of the successful examples of environmentally sustainable programs that you've seen? What makes them successful?

Successful examples of environmental and sustainability programs

Michael Wong (09:41):

Yeah, I think as a consumer, just somebody like existing in this world and buying things, seeing ads.

When I think sustainable companies, I think Patagonia and IKEA have done a really great job of not just doing the work but also communicating that they're doing the work and helping bring sustainability to the forefront of the average consumer's mind and showing that it's not a trade off that you have to make.

But there's a different way to live and it's really cool and it can be better for you too. In my professional experience, we do some engagement with suppliers to act on our own scope three.

We've had the pleasure of working with the ESG teams at Whirlpool and Trane and they've set really ambitious targets.

They have mature programs, they really understand a lot of the scope three categories and the things that go into their products.

Their scope three is a lot of our scope three because we get the products from them and they're a bit more upstream of us, so they have a better understanding of what goes in them.

And then working together is how we really manage that final impact.

Karl Yeh (10:46):

And some of the examples that are pretty big companies too.

What about smaller companies? I know it may be a little bit more difficult to implement something like this while you're either starting up a business or you know, don't have all the necessary resources.

How to start a sustainability program at a smaller company?

Michael Wong (11:07):

For sure. Everybody has to start out somewhere and one thing that I've found that's really nice is that really I found that other teams are super helpful.

For example, we've done some reaching out to suppliers who are earlier on in their sustainability journeys and offered resources and offered expertise on how to calculate your greenhouse gas emissions, for example.

I found that the community is really supportive and there's different conferences you can go to, meet other professionals and learn a lot there.

Other E S G member organizations you can become a part of and trade best practices and do a lot of learning and teaching. People get a lot from it, but they also like to give into it too, if that makes sense.

Karl Yeh (11:50):

Got it. Sense. If you are somebody, a social impact professional or someone just starting out, where are some good places to, how do you get started? How do you maybe build an environmentally sustainable program within your organization?

As a social impact pro, how would you start building a sustainability program?

Michael Wong (12:06):

First steps I think is sort of identify allies.

Find a network of people who would help you along this journey.

A big part of that in a lot of companies is going to be like an executive sponsor or somebody who has a lot of influence over the strategy, having your back and helping you align and really getting to the resources of implementing a program.

Once you've got that traction, materiality is a good first step for a lot of companies to investigate. That's essentially just figuring out which aspects of ESG are most relevant to your company.

And then I think a lot of the baseline work on the environmental sustainability side is doing a greenhouse gas inventory.

Figuring out your scope one, two, and three. And then aligning with different frameworks out there like SAS B, which is the Sustainable Accounting Standards Board.

They outline which ESG things are helpful to disclose on for different sectors.

And then the TCFD, which is the Task Force on Climate Related Financial Disclosures, which gives out four different recommendations on how you can be a good steward on the climate risk side.

Karl Yeh (13:11):

You talked about starting a program up, but sometimes it's not just about getting the buy-in, but it's also about getting the budget and maybe scaling that program too.

Have you seen any successful examples of, and maybe advice that you have in terms of being able to get, not just the approval, but also the dollars to help your program grow?

Have you seen anything like that?

How to scale your sustainability programs

Michael Wong (13:35):

I think a large part of this comes from identifying those allies and that net network of supporters and you might find those being your customer base or the investors from your company or other employees at your company.

I think as climate change is being a much more salient like societal issue, then it's easier and easier to find people who want to use their professional work to help act on it as well.