Susannah Streeter
Hello and welcome to the EY and Microsoft Tech Directions Podcast. I'm Susannah Streeter, and in this episode, we're focusing on how tech and data can unlock sustainable growth and propel transformations. The world is on a quest to become more sustainable, but what does that mean in practice? How could advances in artificial intelligence help achieve environmental goals? Certainly, environmental protection is key. Increasingly so is social equity, but economic viability over the longer term is crucial. So how do you create environments to ensure the planet, people, and profits work more in harmony. When leveraging the use of data is crucial and with the right technology, it can really help move the dial. Increasingly, companies need help to sift through the Environmental, Social and Governance alphabet soup, and find solutions which work for them. The pressure is on due to fast-changing EU and SEC guidelines requiring companies to report on their financial and nonfinancial data, and there is the potential for machine learning to help simplify this process. By following the right strategies, technology and data can be harnessed to accelerate digital transformations while at the same time tackling their sustainability challenges and objectives. That's what we're going to be talking about on this podcast. I'm pleased to say that I'll be joined by two leaders who'll be providing lots of insights about the road ahead, given their wide experience in this realm. But before I introduce them, please do remember that conversations during this podcast should not be relied upon as accounting, legal, investment, nor other professional advice. Listeners must, of course, consult their own advisors. But now I'm really delighted to welcome Ben Taylor, Market Leader for Climate Change and Sustainability Services at Ernst & Young LLP. Hello, Ben. Where are you talking to us today from?
Ben Taylor
Hi Susannah. Lovely to be here. And thank you for having me on the podcast. I'm in slightly rainy London.
Streeter
Pretty rainy where I am too, as well in the southwest of England. What about you, Mark? Mark Kroese is also joining us on the line, General Manager of the Sustainability Solutions team at Microsoft. Lovely to have you with us. Where are you speaking to us today? What's the weather like?
Mark Kroese
Great to be here. Great to be joining you all today. I'm going to round it out by also being in rainy Seattle. I'm in my office at Microsoft's headquarters.
Streeter
Thank you very much. Hopefully, we'll illuminate the landscape a little bit away from the rain and talking about this really crucial topic. Ben, let me start with you. Your clients are facing huge challenges right now. Are the geopolitical and cost-of-living shifts that we're seeing overshadowing the need to take some really big steps forward in terms of sustainability?
Taylor
Well, it's a big question, isn't it, Susannah? And I mean, I think we can all accept we're in what we might call a bearish period more generally, aren't we? You know, more difficult economic conditions, higher cost of capital for companies. It's more expensive. So fewer big capital commitments, maybe fewer transactions, capital-raising events. We just did a survey. We did a quarterly survey of CEOs, 1,200 CEOs, and it's the lowest expected volume of M&A we've seen since 2014. So about 35% of CEOs say they're going to go into M&A. So on the whole, less commitment. I would say bigger transformations are maybe going at a slower pace. And, of course, that would include sustainable transformation. But as we think about climate awareness, I think that is increasing. Regulation is obviously increasing. I'm sure we'll talk more about that. And more and more companies are improving their understanding of sustainability, both their impact on the planet and society as well as the potential impact of climate change on their business.
Streeter
So there is this understanding. Mark, would you agree? What's your take on the pace of change firms are now making in terms of sustainability progress? Need to go a lot faster, I assume?
Kroese
Yes, good things are happening structurally, but they're all just taking way longer than we would like. It is very likely we will actually hit 1.5 degrees this summer. So, the 1.5-degree scenario is increasingly based on the point of view of the scientific community, increasingly off the table. And so now we're just saying, Okay, well, can we keep it at two or 1.75 percent or what's the new target? So we described the period that we're in as the pledges to progress era. We've seen over the last three to five years, all the leading companies in the world and companies in countries make z commitments. 92% of global GDP has made some commitment, but we're not making our commitments globally. And so more progress needs to be made. But right now, the situation is pretty serious and a little bit dire.
Streeter
Sounds like it. 92% making commitments, but simply not keeping up with them. So Ben, it's clear that your clients are really facing some pretty huge challenges right now. What do you think needs to be done? Or how can we move the dial here?
Taylor
I think we should probably talk about regulation. The European Union have made big commitments, 55% reduction in carbon by 2030. They really want to take a leadership position. They've implemented the Corporate Sustainability Reporting Directive that's going to push companies to, in many cases, report on their position as it relates sustainability for the first time. I have to build on Mark's point about the situation being quite dire. I think we don't have that much time. The challenge for companies is that a lot of the foundational work on sustainability, just to even to understand what scope would be required for the regulation or what the requirements are and then into the baselining of where they are, it's going to take time. So we've really got to make sure we can run parallel tracks. One is the progress on reporting and visibility. But importantly, progress on sustainable outcomes, reducing waste, reducing carbon, improving water usage and improving social outcomes.
Streeter
The regulation is clearly creating extra pressure on firms to go back and start from the bottom. Can you expand on this and what this will mean for companies?
Taylor
If you take European Union Regulation, which is probably the firmest and most comprehensive, there are 10 topic-based standards. And what I mean by that is there's five environmental standards, there's four social ones, and there's one around governance. And that includes everything from carbon emissions, climate risk, plastics, pollution, water use, their own employees, their own workforce, the supply chain, impact on communities. Within that, they need to understand their own impact. So what is the baseline? What are they working on? What's the footprint? And then they need to come up with targets and need to come up with plans and actions related to those targets and start reporting on progress. So to get to that point is going to involve a huge amount of data gathering in ways that have never been done before by most companies.
Streeter
So, Mark, what's your take on the regulatory space and the pressure on companies? Would you agree with what Ben's outlined there?
Kroese
So I come to this conversation both as somebody involved in Microsoft's decarbonization and sustainability efforts, us getting our own house in order. But I've also presented to over 100 Fortune 500 companies in our executive briefing center. So, like Ben, I engage with a lot of customers. They're all basically saying the same thing, which my translation of it would be that the reporting tail is wagging the progress dog. There's this very heavy data hygiene motion going on in all these companies where they're like, oh my gosh, this has gone from voluntary to now a regulatory compliance exercise. Just to expand on CSRD or the Corporate Sustainability Reporting Directive, which, of course, comes out of the European Commission, I always think of Europe as ground zero for, like, if you want to see the future in the United States, just look to Europe today because they're usually first and more comprehensive. CSRD requires 1,144 fields of data, as Ben was saying across E, S, and G. I actually had our team internally create a little four by three matrix just to give a sense of Microsoft's readiness for CSRD and Microsoft, I would say, is in the very, very bleeding edge of readiness. So if you take three rows, E, environmental as a row, S, social as a row, and G, governance as a row, and then you take four columns. Microsoft has the data, and it's easy to get. Column two, Microsoft has the data, but it's a little harder to get. Column three, we don't have the data, but we could probably figure out how to get it. And column four, we don't have the data. We really have no clue how we'll get it. We actually had about 200 of those 1,100 fields in column four. Okay, and this is Microsoft. We're a data-intensive company. If we are 20% shy on figuring this out, we'll figure it out. But it just shows the intensive nature of CSRD. And this is by 2025. I think, ultimately, we'll look back and say this is progress that is going to be, in the short term, defined as a big hassle because it will force companies to get all of their data estates in order actually to look and have insight and take action.
Streeter
And Ben, we've talked then about the regulatory pressure, but what kind of pressure are we seeing from investors in terms of sustainability progress as well?
Taylor
It's a great question, Susannah, because it's probably been the trigger over the years for more voluntary reporting and action in companies in response to that. But even if you look back at investors, we've been serving investors for over 10 years in terms of how much they really care about ESG beyond a bit of marketing, if you can call it that. And in 2018, when I look back to the data there, only about 30% of them were using ESG data in a systematic way to really inform choices that they make around investments or portfolio pricing. And last year, we're just about to publish the new one this year but if we could go back to last year, it was around 80%. In the past, investors might have exclusion criteria. So you might include and exclude certain sectors because they're higher or lower carbon intensive, or they've got certain profiles socially, such as gambling, arms, tobacco, etc. But now, company investors are looking at a much more sophisticated way. They're looking at impact. So that could be anything from a tech company helping with the green transition through smart new technology. It could be a transitioning company. It could be an energy company that's investing heavily in renewables, but all the underlying battery capabilities and technologies that go with that. So I think the concept of impact has got a lot more sophisticated than the investors. And I think they're starting to ask much more sophisticated questions of corporates.
Streeter
Do you think, Mark, that we're getting tougher questions at a customer level, but also for an employee level as well?
Kroese
That's right. Just to give you an example, for example, at Microsoft, we have about 200,000 employees. We have a 10,000-person, what I call, volunteer army that is what's called our Sustainability Connected Communities. And the level of rigor and scrutiny and the hard questions that come from these 10,000 super volunteers is really intense. I mean, it has really become part of the employee value prop, which is how sustainable is your company. And as the workforce, the younger workforce comes into more positions of influence, this is only going to continue and get more intense. So, millennial and younger workforces are demanding that companies have sustainable practices and choosing employers based on that. So you're seeing pressures from employees, you're seeing pressures from board of directors, from end customers, suppliers, upstream, downstream.
Streeter
Okay, so Ben, let me hand over to you at EY. So, when you speak to your clients, what are they telling you about the obstacles in the way as they modernize their data to propel their sustainability agendas forward? We know how dire the situation is. What is stopping them from taking those first steps or maybe taking those more advanced steps to really move the dial?
Taylor
Yeah, Mark's touched on this. I think the first inherent challenge is that ESG by its very nature, because it's so spread, you know you're talking about all the environmental factors we talk about. Some of that, Mark illustrates beautifully with even Microsoft struggle to get their arms around it and access it and capture it, measure it. Unlike finance data, which is often an output of a finance process, you buy a thing and it ends up in the finance ledger as a transaction. Things like safety data is a consequence of an event. If you've got a life loss incident or a near-life loss incident in a factory or in a manufacturing plant, safety data is generated from that. But that has to be captured from every single plant. The definitions have to be the same. You have to understand who's accountable for it. You have to have a good end-to-end process. You have to have the right skills and expertise to understand the data and understand the standards on which the data has been compiled. It's a real combination of rather challenging factors, Susannah.
Streeter
Yeah, it certainly sounds like it. Mark, do you think it's partly because certain tools are missing from their IT infrastructure toolkit or app portfolio, for example, which are really crucial to bring about change?
Kroese
Yeah, corporations definitely need new tools for this era, right? And most agree that they really want a new system of record, a new place to have all of their E, S and G data in one place. The Microsoft Cloud for Sustainability is Microsoft's contribution to the portfolio of solutions that we offer to customers. It is a fundamental horizontal data problem. We don't think of sustainability as a vertical, we think of it as a horizontal, where companies are then going to have a dashboard that draws on their SAP system and draws on other HR systems and draws all these systems to get all of this data into one place. There are already and will be even more and more reports. So, I think of this world of one rich data estate with all your ESG data and many queries. I think of each report that you have to do is really a set of queries where you're having to report in this format to this standards body on this deadline. But really all the data has to exist in a single place and it has to be compliant, conformed, cleansed. There's just so much data hygiene that goes into this. So that the data is the two words we use with respect to sustainability data is reliability and interoperability. So reliability means the data has to be good and interoperability means it has to be able to be shared up and down the supply chain because the crux of all of this is Scope 3 data, right? Where you have to get data all the way up and down the supply chain. We joke that we've come out with this Cloud for Sustainability. It's been out for a couple of years now. It's continuing to get better. And we have reviews on quality of the product. Sometimes executives at Microsoft will say, “Well, what is the biggest competitor to the Cloud for Sustainability?” We say it's Excel. Because so many companies started their journey by creating these homegrown Excel systems, which is a natural thing to do, and then basically said, this isn't working for us. We've outgrown this. We need a better solution. And then, of course, they have to transition from that thing to the new thing. And that's a challenge as well.
Streeter
It certainly sounds like there are so many challenges littering the horizon. Ben, it was interesting, Mark there talking about the need for horizontal, not vertical implementation. Do you think then companies are still not realizing this and hoping for a quick vertical fix, but not understanding it still means they need to follow a really significant roadmap for meaningful change.
Taylor
I think that's absolutely true. I would add a couple of words to Mark's two-word mantra. I would add auditable in real-time to it. And the challenge with the Excel solution is when the auditors come in, and the audit regime is getting harder and harder for companies, because we're moving to more comprehensive audits of this data. So you need to be able to talk to how you compile the data, what the evidence is, et cetera. And it needs to be more real-time. I think the challenge with many historic practices around ESG data is that it's a one-off data gathering exercise to push into a report. But actually, as CEOs and leaders in companies are trying to drive change, you need to be able to see how you're getting on, right? You need to be able to, first of all, push your, say, your carbon budget or your water reduction target or your diversity target down to the front line, the people that are running the businesses. And then you need to measure their progress. And that's very hard to do when you've got it in a pretty manual process. So kudos to what Microsoft have done with Cloud for Sustainability because I really think they are leading on that vision. Let's move it to auditable, let's move it to real-time. Let's think about how companies are thinking about performance. Actually, we've done a little piece of work with Microsoft to build some scenario models as well, so that not only can you manage performance, but you can actually look out to the future. So you can say, actually, if I invest in plant A versus plant B, there's a capital commitment, but there's also an outset of outcomes which are more or less favorable to my ESG targets.
Streeter
Yeah. So it's clear, as Ben saying, Mark, that we need to have data real-time. So where do you see technology then making the biggest impact on this and sustainability progress? How will AI, for example, help find faster solutions?
Kroese
The AI is a great, rich discussion. Before getting there, I just want to follow up on one thing Ben was just talking about, which is the quality of the data and the richness of the data. And one of the things I think we can really start to appreciate is the importance of metadata appended to different types of sustainability data. Like if you buy a carbon offset or a carbon removal credit from a forest in California and that forest fire burns down, the real-timeness of that adjustment because you had a bunch of forest carbon credits on your and your ledger, all of a sudden that forest burned down, so those go away. There's all of this complexity that needs to be built into the data structures. Microsoft set up an organization called the Carbon Call, which is about getting data to be more interoperable and reliable. The metadata is just a very, very important aspect to all this. With respect to AI, I think it's one of the most exciting things, and there's a lot of noise with AI right now. The topline summary I would give on AI is we, as a globe, cannot get to net-zero by 2050 without AI. We must have AI. I'll give you some examples of the way in which it is going to enable net-zero solutions. But there is a ledger with AI. There is all of the good it's going to do. And then there is the increased energy consumption, which causes more emissions and requires much greater resources in terms of renewable energy. So in some ways, AI gets painted as the next crypto, the next big super energy consuming industry. But unlike crypto, there's much more global benefit to the solutions with AI. Just to give you some examples. We are part of this thing called Global Renewables Watch that uses AI to get renewable energy more efficiently onto the grid, understanding and projecting peak, low times, times when it needs to be added, working on transmission and storage optimization, all of these things to make sure that the renewable energy is produced and used as efficiently as possible during times when the grid fluctuates. That's a solution that just can't be done with AI. Another example, making sense of spatial temporal data. So this is living, breathing data about all of Earth's natural systems and all of the ecosystems in the world. AI has authorized access to this data. It used to be the purview of data scientists only, and now anybody using natural language queries can say, Tell me the land use change in Sumatra between 2010 and 2020. That would have been like a complex JavaScript query last year, and now it is just much easier. Reporting, we talked about CSRD. We actually trained ChatGPT on the Corporate Sustainability Reporting Directive document and our own data estate, and it filled in half the fields correctly as an experiment. So that's going to just be a big time-saver for people.
Streeter
So, Ben, how else do you see AI as being a potential benefit in the sustainability space?
Taylor
Let me look at it through two lenses. One, through a preparer lens, preparer of sustainability reports, as well as the auditors of sustainability reports. And one intersection there is the risk of greenwashing, which I think would be hugely detrimental to progress on sustainability. We want to have faith and confidence in what people are saying. So AI, for a start, can scan lots of information. So we are using and piloting using AI to scan companies' statements that they're making about anything from the environmental claims to social claims. And then we are checking for risky statements within that legal risk, reputational risk. And then we're using natural language processing with AI to then scan other documents that might prove or disprove what they're saying. So, let me give a practical example. Pharmaceutical company comes out and says, our drug is the most effective at a certain type of treatment. The CEO says that in a quarterly update to the market, we can actually use AI to scan back and look for reference information. They could look for drug trial information. They could look for other drug trial information of competitors and actually, in an automated way, enabled by AI, prove or disprove whether that statement is correct. And that, if you tried to do that manually, would take weeks, weeks and weeks. And the AI can run through this in minutes. So, it's a highly effective way of helping auditors and preparers check for the risk of greenwashing.
Streeter
So it's a real potential step change. And, Mark, what do you think the role of blockchain will play in the future? Do you think we can see the use of carbon credits being tokenized, for example, for emissions, data, and related transactions? What do you think the benefit of blockchain technology could be?
Kroese
Absolutely. Distributed ledger technology is a very important part of the long-term solution. I think it's really important that when people hear the word blockchain, they don't hear crypto. Crypto is an application of blockchain. But at the more abstract level, blockchain is a fundamental part of the solution. Let me give you an example. Microsoft has this $1 billion climate innovation fund, and the purpose of the fund is to accelerate climate solutions unnaturally fast in the world because, as we talked about at the top of the call, time is not our friend here. So we're trying to accelerate markets and make them sustainability markets in general and make solutions come online more quickly. One of the companies we invested in is a company called FlexiDAO. FlexiDAO uses blockchain technology to spatial temporally match the source and the use of renewable energy on an hourly basis. One of Microsoft's climate commitments is to use 100% renewable energy by 2025. That means that we will have a pool of energy that we bought, let's just say it's 100 units, and then we'll have a pool of energy that we use, let's say it's 100 units, and we will say, Okay, in 2025, we used 100 and we bought 100. But by 2030, our goal is to use 100% renewable energy 100% of the time, spatial-temporally matched between source and use. That means with blockchain technology, you can say this hour of power, energy that went to this data center in the Netherlands came from this offshore wind farm on this hour, and you can't do that without blockchain.
Streeter
It sounds incredible that it is possible to have that data embedded for the future, so you can always look back. Ben, which types of industries would you say are already well ahead on the sustainability curve? Some of what we're talking about here obviously has yet to happen, but where is progress being made?
Taylor
You could call out individual companies, but maybe I'm trying to answer that question through the lens of the thread of data we've been talking about earlier and the horizontal view, Mark was talking about earlier, which kinds of sectors are really working hardest at that horizontal view for the benefit of planet and society? I would probably point to maybe consumer, consumer products and those involved in agriculture and product because their value chain starts with farming, starts with biomass, starts with products often sourced from developing countries which are likely to be more impacted by the physical impacts of climate change before others. So there's an existential threat to their supply chain. But obviously, there's a huge opportunity for social impact there in terms of education, health-care, fair living wage, giving work and dignity to communities that often don't get enough attention. But then you move that through the value chain, and companies are starting to have to get Scope 3 information. They're having to figure out the carbon footprint of the products that are developed through the lifecycle that they're creating. Then often they have to talk to consumers about the carbon footprint. Some companies are starting to play with carbon labeling so that as a consumer, you can pick up a product on the shelf and you can make a choice not just functionality of a price, but also on sustainable impact. To pull that off operationally, like from a systems and process point of view is as complex as it gets right now. But huge kudos to some of the bigger consumer products and agriculture companies who are really actually trying to do that.
Streeter
And, Mark, do you think that energy and resource companies will need to adopt climate data systems like those used for, say, financial accounting or customer relationship management in the future? Are we going to see that pattern emerging?
Kroese
Yes. I'll keep my answer short. Every company in every industry is really going to need to adopt this. And of course, the larger the emissions footprint from an industry, the more imperative it is that they do it and they do it sooner. There are all these industry watchdog groups, and they say, I can't believe Microsoft is selling cloud solutions to the oil and gas industry. Shame on you. My view on that is you have to love all your children equally, but you have to even especially work with those who are the biggest problem children. And the oil and gas industry is, in some cases, very earnestly looking for new solutions. And we are happy to work with them because it helps the world. There's no parental punishment mindset here. Let's get everyone, irrespective of their current situation, let's get everyone into a better place as soon as possible.
Streeter
And let's focus now as well on financial services firms, Ben. Just how critical is it that they can show how portfolios are investing in, are kinder to the environment?
Taylor
That question is triggered by - are the consumers and shareholders of financial services firms motivated by environmental and social impact? And all the data points to that, yes, they are. But also, as a group of financial services companies, there's been some industry movement to show some leadership and make big commitments in terms of net-zero and greening the portfolios. The regulation in the EU, in particular, is pushing financial services companies to be more transparent about their portfolios. But it's a dilemma. Back to Mark's comment about oil and gas. If you're a financial services firm, do you stick with, do you disinvest? Do you divest from oil and gas because they don't fit with the criteria that you're now setting in terms of having a greener portfolio? Or do you double down and invest so that they can actually transition? That's the dilemma facing financial services firms. But if the hump that they're going through at the moment, for sure, is just getting their arms around the footprint, essentially, of the portfolios.
Streeter
So we do, though, need a huge reskilling, don't we? Of employees right across the board, given the amount of ground that we need to make up. Mark, what are you doing to help companies upskill their talent around sustainability?
Kroese
The first thing we did was about a year ago, we co-sponsored a very significant piece of research done with BCG, the Boston Consulting Group, on the state of sustainability skilling that exists today. Almost a census of where people are in the jobs, where they came from, and where we're going. I mean, one of the fundamental urgencies driving it is there are some think tanks that believe that there are about 18 million jobs needed to fulfill the Paris Agreement across the world in all industries, all sectors, about 18 million sustainability-skilled people, and some 15 million of those people don't exist yet. So, part of it is really a charge to the education sector to have a more robust sustainability curriculum. Today, if you want to go into sustainability, you go get an environmental science degree. But what about carbon accounting? Where can you go to get a carbon accounting degree? It's a lot harder to count tons than it is to count dollars for all the reasons we've talked about.
Streeter
Sustainable engineering, as well.
Kroese
Sustainable engineering is a great example. Writing more efficient code. How do you make the trade-offs? A few around trips to the server. I mean, the impact of software code is felt both in the amount of compute, the amount of network traffic, the amount of storage required for files because you have more embodied carbon. So that's a whole field that needs sustainability. Another example, corporate procurement. You cannot be in procurement today, which sounds like historically just boring field, right? The procurement space is actually quite exciting. I talk to our procurement people all the time. They're buying concrete and steel and chips and all the things, in our case, necessary to build a data center. And those people have to have deep expertise in sustainability. So to summarize, sustainability has a number of vertical functional expertise degrees, if you will, that you need, like from engineering to procurement to carbon accounting to environmental science and more and more and more. And then there is this horizontal ... There's this thing that corporations have to do, which is have sustainability knowledge baked into just about every job in the company. And that is the horizontal piece where it is a part of every job, and it is a bunch of specific jobs. So there's this massive upskilling. We have a number of sustainability curriculum. We have a thing inside of Microsoft called the Sustainability Badge that is a three-hour course that just gives you the basics that every employee has to take. So this is the first or second inning of a long, long game of 9, 10, 12 innings of the upskilling of the workforce.
Streeter
It's going to take time, but certainly we need to propel that progress quickly. And Ben, what would you say about almost advertising from the off that these sustainable careers are available, and actually, could that help attract talent? It's such a fight for talent across so many industries right now. Do you think Gen Z would be more into going into careers where clearly sustainability was written firmly on the tin?
Taylor
Yes. And since you've invited me to plug EY's capability, we've got a very large, dedicated practice, nearly 4,000 people of sustainability professionals in the team that I work in. But one of the things to play on Mark's point is we've got nearly 400,000 people. So how do we leverage that scale? Their supply chain consultants, the technology consultants, the change consultants, the strategy consultants. We're working systematically with thousands of those people now to join the dots to make sure that not everyone has to move department. And that's true of corporates as well. If you're sitting in finance or supply chain or technology, learn about sustainability and do what you can in your role to make a change because the change will happen in those functions. Yes, you absolutely need the thoroughbred sustainability professionals with the engineering and the science and economics backgrounds to be able to make sense and help companies set the targets. But the change will happen in the functions.
Streeter
So let me ask you just as we're drawing to the end of this podcast. First of all, Mark, how is Microsoft committed to social impacts, but also environmental impacts globally? What lessons do you think can be learned from Microsoft for other companies? And what's really moved the dial?
Kroese
I think the lesson we've learned is that you have to have multiple spheres of influence. And by that, we think of Microsoft's contribution in three ways. One is what we call Microsoft sustainability, and that is to get our own house in order and to achieve our goal of being carbon negative, water positive, and a zero-waste company by 2030. But we are, as a company, about three one-hundredths of one percent of global emissions. So there's this other 99.97% that's not us. So you say, we achieve our goals. Is the world better off? Well, it's three one-hundredths of one percent better off, but we haven't solved the problem. So, the second sphere of influence for us is customer sustainability. We work with all the large enterprises in the world. And what can we do? What technology can we provide to them so that they can accelerate their sustainability journeys? And how can we help with cloud technology? So the Cloud for Sustainability, our planetary computer, our emissions impact dashboard, or like all of these things are tools that we feel compelled to help with because we can influence the other 99.97%. And then the third sphere of influence is what we think of as global sustainability. What are the things we're doing just to help the world? So we're trying to influence policy all around the world, from China to India to the United States to Western Europe. And we have a policy team in DC that's pushing on various policies. We had a hand in the Inflation Reduction Act and all of this. We're trying to accelerate markets with our billion-dollar climate innovation fund. I could go on and on, but a company should really think about the places it can make meaningful impact in addition to getting your own house in order. That's where it starts. But really what Microsoft is doing because we're early on in getting our own house in order is we are essentially trying to write the 200-page Harvard business case on how to decarbonize an enterprise and share and publish all that learning so others can learn from it and get there quicker. So sharing transparency, lessons learned, failures as well. Our sustainability report, 80 pages, check it out. But it documents our story on an annual basis on our journey. And we're trying to make sure not only do we get our house in order, but we share so others can do that as well.
Streeter
An ethos worth sharing. Ben, what lessons can be learned from EY's agenda to reach net-zero by 2025? How are you getting your house in order?
Taylor
In 2020, our CEO appointed a Global Vice Chair of Sustainability for the first time - it was Steve Varley, who was the Chair in the UK and ran a $2 billion business. So that was a first statement of how serious we were to do exactly what Mark said, get our house in order, while also thinking about how we enable progress with others. Our net-zero commitment by 2025 was really driven through Scope 3. So, in 2019, we had about 1.3 million tons. So we're not huge emitters, but it's not nothing. And we need to lead by example. How do you change a consultant's behavior? I don't know if there's a light bulb joke in there, but trying to get consultants not to travel is the number one challenge. So then it becomes all about behavior change and nudge theory and making a positive out of that. Spend more time with your family, think about your well-being, think about the cost of the project, and think about the benefits to the client in working differently. So that's been a significant change, and we're nearly at a 40% reduction already since that 2019 baseline. So we're making good progress.
Streeter
So, let's now look into the future. I want you to peer into your crystal balls now and look ahead to the year 2040, a decade before the Net-zero deadline. So, Ben, just how confident are you that companies will be employing the right tech to capitalize on data to propel change? You may be looking through both pessimistic and optimistic lenses here.
Taylor
I don't want to be a dour Scot and live up to my stereotype. But I will start with a bit of pessimism because I think there's a lot of stuff coming out at the moment just showing what a bad state we're in in terms of the vital signs of the planet. There was a scientific report that just came out that talks about 20 human-related vital signs out of 35, which are now all-time records in terms of stresses on the planet. And I guess my fear is that the regulation drives individual companies to measure and report and make progress on their own with incremental changes and everyone declares a success. But actually, at the macro level, planetary level, we're falling short. We're not seeing the change that needs to happen. If I move to optimism and think about the role that data can play in a world of AI and open data sharing and everyone understanding their own impact on the planet, but more importantly, the context in which they operate. They're one company within an ecosystem, within a sector, with a set of consumers, with a set of value chains. If you can get your head around your context, it sets a very different picture for companies, and I really, really hope that that heads us towards a more synchronistic approach to climate action. I'll stay hopeful for now. I'll end on that note. Radical collaboration, let that be the watchword.
Streeter
Hopeful end there. So, Mark, what about you? Which nascent tech that's emerging now do you think will be mainstream by 2040 in moving the dial on sustainability? Are you optimistic or pessimistic?
Kroese
Well, I oversee our billion-dollar climate innovation fund. We've made 55 investments invested over 700 million, and collaborated with Breakthrough Energy and many other investors on all kinds of stuff. So it's quite the catbird seat to sit in. And in terms of the sustainability tech landscape, if I had to pick one that I think is potentially just going to save us all, it's probably fusion. We need to have, for a lot of these technologies like direct air capture, direct air capture only works if you have a near unlimited source of renewable energy. So, investing in energy and energy solutions is fundamental. And then the second thing I would say is when you look at the role of the technology plays in climate solutions, it's just one of three parts of the flywheel. You need, when I say technology, just new solutions like Fusion or Blockchain or any of these things. You also need it to work in concert with policy and markets. So the flywheel of technology, policy, and markets is fundamental. The nuclear solutions are only as good as the regulations that allow them to come online more quickly, not the 15-year cycles we've seen in the past, right? If you look at electric vehicles, they have now finally got the flywheel of technology policy and markets going, where there is incentives to buy, there are incentives to build, the technology is good, the cars are really great now, and on and on and on. So we've finally seen the flywheel of EVs moving with technology, policy, and markets in sync. We're going to need that same flywheel across all industries. And when that happens, I start to become more optimistic. Right now, I'm with Ben. I'm short-term pretty bearish long-term, more medium. I'm just hopeful because I can see it. But you can't get it seven-eighths right. You have to get the technology, policy, markets, flywheel, and get it eight-eighths right and land these things. And it's frustrating to see us so close yet so far in a number of markets.
Streeter
Absolutely. We certainly need a big kick to get there. Well, thank you both for such a fascinating discussion. Mark and Ben, a real pleasure to talk to you. I could keep talking for many hours.
Kroese
Thank you for having me.
Taylor
Thank you very much, Susannah. Great to be here.
Streeter
So really super useful insights on how business can propel their sustainability drives using tech and data. Let us remain hopeful. Thank you so much for your time. And a quick note from the legal team: the views of third parties set out in this podcast are not necessarily the views of the global EY organization nor its member firms. Moreover, they should be seen in the context of the time in which they were made. I'm Susannah Streeter. I hope you'll join me again for the next edition of the EY and Microsoft Tech Directions Podcast. Together, EY and Microsoft empower organizations to create exceptional experiences that help the world work better and achieve more.
