ESG - how to transform at speed through value-led sustainability

Zahid Fazal: Hello, everyone. It's such a pleasure to welcome you all to our session today. As some of you know, my name is Zahid Fazal and I'm EY Canada's Manufacturing and Mobility Sector Leader. And it's so great to have so many of you join us today from coast to coast in Canada and elsewhere. The pandemic has dramatically transformed many businesses over the last two years. It's driven tactical change across operations and accelerated the need for digitization and automation. New challenges have required companies to transform supply chain from end to end. Workforce expectations have evolved. Companies have had to rethink the way we attract, recruit and retain talent to fuel our businesses across all sectors. At the same time, broader megatrends are also driving their own fair share of industry transformation. To that end, our research shows that ESG and decarbonization itself represents top risks for many sectors. And this is also true for us right here in manufacturing and in mobility. The transition to the low carbon economy is reshaping our sector, and this is huge. The way our stakeholders assess our industry's approach to sustainability is also sending a ripple effect throughout the sector. And let me give you some examples. Regulators are re-evaluating the way companies report against ESG, decarbonization and sustainability overall. Shareholders are looking at sustainability through a more value-oriented lens ever than before. Employees are now factoring your approach to sustainability into decisions about how they work and where they work. And all of these factors will impact the future of our sector and the bottom line. Now, today, we've put together a fantastic panel to dig into these issues. And we're going to get deeper into factors that are driving the ESG agenda for companies. We're also going to get to the heart of what really excites me and many others at the industry level. How does looking at business transformation through the sustainability lens actually reduce risk, unlock and build long-term value? So, with that in mind, let me introduce our great panellists today. We have Hélène Gagnon, Chief Sustainability Officer and Senior Vice President of Stakeholder Engagement at CAE. Through her leadership, Hélène is working to make the world a fundamentally safer place. Jennifer Nakata, ESG Director at Ballard Power Systems. And Jennifer has built an operationalized organizational capacity to drive ESG performance and stakeholder value for many, many years now. Joe Cosentino, Senior Legal Counsel at Magna. For more than a decade, Joe has been driving progress right across Magna's ESG and sustainability commitments at an operational and organizational scale. And last but not least, our moderator, Kent Kaufield, EY Canada's Chief Sustainability Officer. Kent has built his career at the heart of Canada's energy industry and brings unique transformation perspectives around ESG, decarbonization and sustainability. A big thank you to each of you for spending time with us today to discuss this emerging and evolving issue. So, on that note, Kent, over to you. Thank you. 

Kent Kaufield: Thank you very much, Zahid. Thanks for a great introduction. We're all excited and we've been prepping for this for the past couple of weeks, on and off, all doing our homework. Today, we're going to talk about the race to sustainability and the role that advanced manufacturing and mobility plays in that race. For years, I think ESG has been a topic that financial service institutions have talked about at a regulatory level. And how do they make it real? Coming from the energy sector, as Zahid said, we've been talking about it in oil and gas and P&U for a number of years too, and mostly on the E side, probably less on the S and the G side. But I think what we all know is that the advanced mining and mobility sector, you guys are the engine that makes the economy run. This is where innovation comes from. What you're going to hear today is a real interesting mix of reasons why ESG is important to the AM&M sector, where the innovation is going to come from, and where the friction and both the friction and the fuel to accelerate is coming from. It's a great panel. So, the way it will work today is we're going to do some opening comments from each of the panellists, then we'll get into a little bit of Q&A. We highly recommend and we encourage audience participation. So, in the chat, please put in your questions. We have teams that will track them. I'll get to them as many as I can. One of my key learnings, I've been in this role for a little over a year now, is these conversations are so much better when you ask questions because the perspectives that everyone shares, we're all learning together. This is an area that's still growing and developing. The regulatory framework is still evolving. And I think the more we can share, the more we will get to a better place, and we'll get there quicker. So, with that as background, please use your chat. We'll stick to the hour, and I think we're going to have a great dialog. So, to kick us off with some opening comments, Joe, I'll go to you, and you can kind of share Magna's view of the ESG world and the race towards ESG.

Joseph Cosentino: Sure. Thank you, Kent. And good afternoon, everyone. The key word Kent mentioned, I think, was acceleration, because in automotive, like probably many industries, we're seeing an accelerated focus on ESG, in particular, carbon neutrality projects and the push to reduce emissions both in a company's operations, and for us, the products that we, the parts that we supply that go into vehicles for OEM customers. And that's a key focus, I think, of consumers, of regulators and the companies themselves. So, the good news for us is that I think, the things that we have done in the past on making our operations more efficient and the things that we've done in terms of innovating and light weighting our products are kind of a natural fit for what's going on, so I'm excited to share more about what Magna's is doing.

Kent Kaufield: Thanks, Joe. And I love the comment of linking both operations and end products because like you, EY is very focused on our net zero targets as part of building a better working world, in addition to incorporating it in our solutions and services. And if we're not kind of eating our own cooking and living as we advise, you know, it's hard to sell. And I think you guys are doing that from the heart. And I want to assure the audience that Joe's not in a fire alarm situation. We're just working with this camera. So, if you see his light flashing, he's very safe and well taken care of. So next, we'll move to Helene. I'd love to hear your view from the heights of CAE.

Hélène Gagnon: Well, yes, hopefully, everyone knows, CAE. We're the world leader in pilot training and flight simulators. As you see behind me, we work in the civil aviation space, defence and security and also health care simulation. And we're there to make the world a safer place. And for us ESG has really been accelerating like exponentially, I would say, in the last year. The number of questions by investors is tremendous. I've lived it and experienced it myself this week. We hosted an Investor Day in New York with over 80 investors, and most of them had questions for me, and they were all interested in understanding what we're doing in the ESG space. But it's not just the investors, it's also the employees. Honestly, for employees, it's really, really important to feel that they're working for a company that has a good purpose. For us, it's making the world safer and a leader in ESG. So, on the E, on environment, on the S and of course on the G on the governance side. And increasingly we're seeing demands from customers in bids for civil aviation, from airlines, in bids for defense and security, from various governments. They're asking us questions about environment and carbon footprint. That's fairly new, but it makes sense when you think about it, because these are contracts that are paid by government money and the same governments are making some commitments on the world stage, on the environment. So, they want to make sure that they're leveraging their procurement powers to achieve those objectives. So, for us, accelerating has also meant that we are carbon neutral. We've been carbon neutral for two years. So we are compensating for our residual carbon for Scope One and Scope Two emissions. And what that means is that we basically built in an incentive for us to reduce our carbon at the source, because if we don't want to continue just paying the compensation, then now we really have to reduce. But we wanted to take some actions very quickly, not say we're just going to make a commitment for 2030, 2040, 2050. We want to be role models and make some tangible, concrete actions on climate change very quickly. And we forced ourselves to do so. And with this built-in incentive that we built for ourselves, not because we're forced by regulation, but because we think it's the right thing to do for the planet and for our various stakeholders, including our employees. Now it's forcing us to have more projects to reduce at the source, and we can talk about that a little later, but definitely accelerating on our fronts from all stakeholders.

Kent Kaufield: Those are great comments Helene, and I love the comment, you can't buy or fund your way out of this by buying offsets and buying recs and you really do have to live it from within and finding innovative ways to get to net zero internally. I think it's such a great message for everyone. And to your point, also, talent pays attention that your people want to know that you're walking the talk by giving them time, latitude or some kind of mechanism to be innovative, to reduce carbon in whatever way that makes sense to them. And finally, Jennifer, I'll turn it to you. Ballard is such a great story in the Canadian economy. It feels like you've been around forever, but you've been innovating forever as well. And so, I love to get your point of view because you guys are going to be one of the sources of innovation to help the AM&M sector electrify much more quickly.

Jennifer Nakata: Yeah, thank you for that. And thank you for having me on the panel here today. Certainly, sustainability has been an integral part of Ballard over the years. And we've really tried to articulate that in our purpose of here for life. Really connecting our employees and our customers to the products that we have and the hydrogen fuel cell power that we can use to build out sustainable transportation through the energy sector, too. So, yeah, really excited to be here. Thank you.

Kent Kaufield: I love the here for life purpose. Our EY building a better working world purpose came out a few years ago and I'm really old and I've been through a lot of these taglines that we've had over the decades. And when that one came out, I will say it was really one of the first ones that I started to digest. And when I like that, like I understand how I can use it in not only in a business context, but I can talk to my kids about it at home. I think here for a life is one of those that makes sense to me. Like that's really what Ballard does. So it's amazing. Let's kind of jump right into it and Joe, I'll go back to you. One of the neat parts of the comment of our conversation was it's a big world, and all of your companies play in it as part of a global supply chain, both from a customer and stakeholder parts. And the world is moving at different paces. So, you have different jurisdictions moving in different, I think we're headed in the same way, but can you describe how these different paces and regulatory regimes, how does that impact how you think about Magna thinks about the business and how do you address some of those differences in timing?

Joseph Cosentino: You know, there is some challenge with, you're dealing with regulators, you're dealing with customers, and you're dealing with different supply chains of different sophistication. And there are, I think, on the scope one and two side, you know, on the energy side, everything is sort of converging so that you don't realize the different pace. On the customer side, I would say traditionally our European customers were much more heavily focused on sustainability than maybe others. And because we've got three major German automotive OEMs that are our key customers of ours, it forces us to evaluate our own targets and goals, right? Because we may have to accelerate what we're doing, even though we may have had a different timeline. And we've actually had to do that with our scope one and two emission projects and targets.

Kent Kaufield: It does make you think differently when you have to align to a major stakeholder like your supply chain or an OEM in this case. And maybe that's a good segue way to Helene, because you guys also do, because you do a lot of collaboration within your supply chain, your customers too. How you build your products and how you take them to market is always on the kind of the cutting edge. Has it been a challenge to collaborate when these things move at different paces?

Hélène Gagnon: With the various suppliers? Yeah. Yes. Well, we're always a scope three for somebody else, right? Everybody's connected in that  chain of carbon. So, we are in conversation with our customers to see how we can help them. And of course, we are helping them because whatever pilot training they're doing on the flight simulators is avoiding 5 million tonnes of CO2 every year. And now that we have new software where we can actually help airlines improve their fuel efficiency, fuel efficiency means less carbon. So, we're there to help. And on the other side, we are collaborating with our or suppliers. Of course, we have various expectations on the G side with our code of conduct. So, governance is very important for supply chain, but on the environment and social aspect, they're not all at the same level of maturity, as you said, and we need to help them accompany them. And we want to associate ourselves with companies that actually share our values on the environment side. And what we're going to do is that we are going to create, we're working on it as we speak, a recognition program for our suppliers where we're going to recognize our best suppliers for diversity and inclusion, for actions on climate change, that sort of thing. So, that's a way also to promote best practices. And in some industries, I was at the Board of Air Montreal last night. That's the aerospace cluster right here in Montreal, the Greater Montreal area. And we're going to actually have a program to accompany the SMEs. The small and medium-sized businesses that are less mature on the ESG side. Accompany them to actually grow in their maturity level on the ESG, to actually be able to follow the bigger companies and the OEMs on that journey. So, I think various industries will get organized because if we try to do everything by ourselves, it won't work because we need the scope three. And getting the Scope three inventory of carbon, for example, is a bit complicated for a multinational that has suppliers all around the world and a presence in 35 countries. So, you're right, not everybody is at the same place, but it's also our role to actually help the others come up because otherwise, we won't achieve our goals.

Kent Kaufield: I love that perspective because you collaborate together and you have a shared goal of reducing emissions. We've had a lot of discussions with our clients and I know there's some concern about especially the scope three calculation because it's so big and so broad and the number might be so large, especially for some of our oil and gas clients, as an example, they wonder how relevant it's going to be. Might be too distracting for shareholders to really understand what that means for stakeholders. On the flip side of it, when you're working together to reduce a target with your customers, with your supply chain, everyone's in it together. And I think that makes the target a lot more tangible and makes everyone working towards something. We'll get there faster. Jennifer, I'll probably leave it to you to get you to weigh in on this, too, because you work so closely with your customers and within sectors to electrify things like transit. You've seen the benefits and some hurdles to collaboration. And how do you work with those folks to collaborate in a way that you have shared goals?

Jennifer Nakata: And it can be challenging, too, especially if you have different companies in different jurisdictions, and those jurisdictions have different expectations and requirements that need to be placed on it too. So, really being able to understand what the stakeholders need for their areas so that we can either partner with them in certain areas to help them with their carbon reduction or share some of the tactics that we have taken to be able to do that and then really find opportunities to sort of do it together. Because, like you said, Helene, all the scopes are all connected. And so it's really needs to be a partnership between everyone to be able to get to each of our net zero targets as soon as we need to. So, yeah, certainly lots of opportunity for collaboration across the space.

Kent Kaufield: And I think that's a great point. As we continue to, as a reporting evolves and there's more standards around it, I think you will see elements of double counting and finding a way to articulate that in a reasonable fashion again. So, it's a positive, not a negative is going to be part of the rollout if they get the standards. Maybe I'll go back to Joe. In your opening remarks, you talked about the importance of operations and products and how important that is to your strategy of giving your access to customers to lower carbon products. How much of that strategy came from within the organization where you have your own people saying, we have ideas to innovate differently or try something differently? Or do you develop those ideas mostly with your supply chain? Where does that innovation come from and how is Magna really nurtured it to make it real?

Joseph Cosentino: Well, I mean, innovation is the lifeblood of a company like ours, right? And we have our management, our R&D groups are focused on the megatrends that were mentioned at the beginning of this panel. And I think there's a collaboration with our customers. It's sort of a back and forth. We've always been an innovator. We propose ideas to them. We sit with them and understand their sort of product footprint over the next 5 to 10 years. So, there really is a back and forth and our board and our management are big drivers of this. Board members sit on different boards of different companies. And the ideas sort of cross-pollinate and the importance of sustainability and climate-related risks and opportunities sort of cross-pollinate with that interaction. So, I think if you don't view sustainability and climate-related risks and opportunities as strategy, I think more as a compliance thing, your company is going to miss out.

Kent Kaufield: Great comments. Actually, I love the additions in there. I should be more aware of this, but when you talk about it, I talk about employees and supply chain collaborating and new ideas. If the board is doing it and your board is exchanging ideas, boy, does that ever trickle down fast because then you really get things that are effective. And I think that's outstanding. Maybe I'll pause. Helene and Jennifer, would either of you would like to comment on where these ideas come from within your organizations.

Hélène Gagnon: I am just going to add something on the board cross-pollination that Joe referred to, because I also sit on various boards in addition to being an executive at CAE, Hydro-Québec, the Montreal airports, the Canadian American Business Council, the aerospace cluster, etc. and sustainability is being discussed everywhere. And you're right, Joe, that board members are paying attention to ESG and then they're seeing what the organization is doing and then bringing that, you know, best practices, some of those best practices to another organization. And that's also a stakeholder that will accelerate. Board members are right now, I guess, becoming a lot more mature on all these ESG issues, and they are pushing that agenda on various boards. So, it's an interesting point, but I see it.

Jennifer Nakata: Yeah. From a collaboration standpoint. I know one thing we did internally was brought together a group of employees for our Mission Carbon Zero group, and it was a lot of really enthusiastic employees that we're there to find ways that we could better innovate, to reduce carbon internally within our processes, our offices, our operations and everything. And I feel like that approach, even though it was an internal one, I think there's opportunity to do that within supply chain and with other areas to sort of drive innovation with customers on the product side, how reducing carbon and how we produce our products will help. And then also doing it in the supply base, finding these innovative opportunities to collaborate on that. And so, I think our Mission Carbon Zero team is just a great example of how internally we brought together enthusiastic employees to really drive ideas and thoughts on how we can make that shift.

Kent Kaufield: That's a great example of a way to do innovation internally. Our experience would be organizations that actually give time and kind of oxygen for that group to incubate an idea. It can't be done off the corner of someone's desk, but you have to have it, so you've named it by giving it a purpose. I think that's outstanding. There's a good question that came in from the audience and it plays kind of into this is as you guys are all from big brand name companies. You're well known in Canada and globally, but my bet is in your supply chains, you do deal with smaller suppliers not only in Canada but abroad. And from a Canadian perspective, so much of our economy is made up of small and medium-sized businesses that are AM&M in the business. How do you help those smaller organizations innovate and come on board and help incubate ideas for them? They may or may not have the breadth or the capacity to do a bunch of ESG research, but they might have some innovative ideas. Is there a way to reach out to them, to include them in the process, to help that small and medium-sized business be successful?

Hélène Gagnon: Yeah, maybe I'm going to start. So, as I said, we're going to create that recognition program for suppliers. That's going to be a way to share best practices. But I'll give you another example. We hosted a webinar for our supply chain on diversity and inclusion over the last year, exposing them on what is it that you know what it could mean for them or where they could get some certification if they are diverse suppliers and why they should consider that and how they could do that or so starting that conversation on specific topics. So, I think that's also one way to engage the supply chain on the various topics of interest for you on the east side.

Joseph Cosentino: I’ll weigh in as well. So, looking for opportunities to increase training and awareness. We're doing a lot more engagement in terms of. Self-assessment questionnaires with our supply chain things that we've done with our customer, that our customers have demanded of us for many years, we're trying to cascade down into our supply chain. And then also as part of our sort of renewable green energy roadmap, a strategy, thinking of ideas. Can we, if we're going to get involved in a project. Right? Or a power purchase agreement, can we bring in some of our suppliers into that? Can we give them opportunities on energy metering that we've negotiated with because of our scale? So, things like that are in the works. And I think they'll be an important element of getting a handle on scope three.

Jennifer Nakata: Yeah. I think a couple of thoughts came to mind on my end too, especially for some of the smaller organizations or suppliers that we might have been working with if we can help them sort of give a business case to some of it too. I mean, really reducing energy, reducing waste. There's a cost benefit to some of this, too. And so, if we can help our suppliers with that business case or show basically within the pitch, know how that would play out, then it can be helpful for them to get buy-in and support in their organization to prioritize some of that activities. And then, of course, it has benefits in their own ESG portfolios, in their own scopes as well. But I think it's important to also see the business benefit when speaking to those groups too.

Hélène Gagnon: And Kent, if you allow me, I had another idea that  was prompted by my colleagues. We did our or redid our materiality assessment this year. After a few years, you have to do that, as we all know. That's where everything starts in ESG, is your materiality assessment. And so, we sent our questionnaires to a number of suppliers and I had a few suppliers call me and say, why should I answer this? Like, I don't know you know, how you're doing on, you know, such and such ESG issues. And I said, Well, you better pay attention. You know, I value your opinion. I want you to really think about this. I want you to answer the questionnaire because this will serve as your first kind of ESG education 101. You'll see all these questions related to ESG. You have to stop, think, how do I believe CAE is doing on these things? Because eventually, we'll come to you. You'll need to get on that journey so that another way to start educating your suppliers is actually asking them to be part of your materiality assessment and start educating them about the breadth and depth of issues on ESG.

Kent Kaufield: I love that comment because we're seeing that not only in our business how we respond to RFPs or proposals with our suppliers. And I pull a little bit on a thread that you started in your first set of comments Helene, is that I think certainly from a Canadian perspective, sometimes we default to the E part of the conversation. But we're getting asked, and I know you guys are asking and getting asked very specific questions on the S and the G as well. And the weighting internally from how you win, work or grow is not always to the E, it's just as important on the S and the G. So, whether you can really articulate how you're doing in communities or with your indigenous relations or with, you have to be able to tell, not just tell a story, but show real examples of how you're bringing that to life. And so maybe I'll just open up, maybe Jennifer and Joe, if you guys want to weigh in, how did you guys build the S and the G and a little bit in addition to the E. Any examples of where you've seen it work or where you've seen some challenges?

Jennifer Nakata: Maybe I can start. So, I mean, certainly being an organization thats product is really out there to help mitigate climate change and be part of the low energy transition. There's a lot of attraction to our company for that, for those people who have that passion. And I feel like a lot of the work that we're doing, and even the Mission Carbon Zero team and being able to engage with the employees internally has been really important from a recruitment standpoint as well. So, as we're growing and being able to show that we're truly living the values of the organization and the values within ESG, it can become a really strong attraction tool too.

Joseph Cosentino: Right. And on our end, I think diversity and inclusion is sort of the big topic in the S or G category. We've significantly ramped up our activities there. And you made a point that there's a lot of regulation, a lot of things changing, a lot of investor interests, a lot of acceleration of all of these topics. And what's important is you're not really showing a policy anymore, that you've got a structure in place. You've now got to start demonstrating real action and you've got to back it up with metrics and you've got to disclose those metrics. So, we're seeing an acceleration in terms of how you're engaging with the outside world in the public and your stakeholders. And so, if you're not demonstrating progress, it's readily apparent, I think, for many companies.

Hélène Gagnon: On the S side Kent, you know, I think diversity inclusion, for sure, health and safety. But at some point, companies need also to think about societal and social impact. And I think, you know, during the pandemic, that's where we saw a lot of examples and a lot of companies step up on social impact. So, for example, say we design and build thousands of ventilators. Well, we're not in that business. We had never done medical equipment. We did medical simulation, but we did it although our markets collapsed, from one day to the next you know, in the airline industry. We said, okay, well, society is in trouble a lot more than we are, and what is it that we can do? And so we actually worked on the ventilator. Then the year after we said, well, you know if we want to get out of this pandemic, we'll need to vaccinate people. And we were the leaders in convincing the Quebec government to allow vaccination through companies. And we had our first the first vaccination center that opened and company was with CAE. We served as a reference for the other end. 400,000 doses of vaccines were administered through companies. Thanks to the leadership that we made. We're not in the business of vaccination. That's not our core. We did that for social impact, and we think that it was definitely measurable. It's a real impact and I think our employees were so proud to be contributing and having that impact over and above the core of what we do as a company.

Kent Kaufield: Helene, those are great examples. You know, the pandemic really did give organizations an opportunity to shine from a societal perspective. And I think you really saw some of that and those are great examples. I think embedding that in non-pandemic times because hopefully, that was an anomaly that we're not going to go through many more times or ever again. Embedding them. We would say our experience would be, we would never, ever say to a company that your financial value and having a well-run company sound is not important. Without it, the rest of it kind of falls apart to a certain degree. It's got to be well run financially. But over time, contributions to society, how you manage your talent, all of those values will be weighted much differently than they are today in the eyes of the public, not only from a stakeholder shareholder perspective but from a talent perspective, too. So, you said a keyword in there, is making sure you can measure some of that and show where it made an impact and how it made the impact. Some of it is quantifiable numbers. Some of it is going to be a little harder to quantify. We do have a question from the crowd here, and I'll try to paraphrase it. You guys must be doing a really good job of talking about ESG, because the question is you guys all make getting to net zero sound easy. So, I don't think any of you would say it was easy, but it is purposeful. And I think the way you've articulated why you're going there makes it probably sound easier than it is. The question is, the experience is that ESG targets are hard to even set, never mind to achieve. And they do require investments, in some cases quite massive investments. Maybe changes to cost structure or products or talent. And I think really the question is how do you balance the short-term kind of whether it's financial driven talent retention traction with the longer term getting to ESG targets that are 2030, 2035, 2040? How do you balance the short-term needs for success versus the longer-term need to get to an ESG target? Is that a conversation you have inside the organizations on a regular basis? Has it changed short term versus long term? Maybe Joe I'll start with you.

Joseph Cosentino: Yeah, I think from our perspective, because our customers are going down this journey and going down this journey aggressively, it's kind of like the debate isn't necessary because we've got to be on board or we're going to be lagging behind and we can't afford to be lagging behind. I think from an employee perspective, I think it was mentioned in one of the previous discussions, you know, doing this is not only a recruitment benefit with millennials who are interested in ESG, but the enthusiasm that I've seen within the organization with existing employees based on the actions and the projects that are being planned is has been phenomenal. So, it's got a benefit across the organization, both existing and potential hires as well.

Hélène Gagnon: I'm going to say on the short term versus long term that when we made the commitment to become carbon neutral, we made that commitment before the pandemic. And it was prompted by the big demonstration that was held in Montreal and in many cities around the world where people were marching for the environment. And our CEO, you know, looked at us and said, look, we're doing a lot on the environment, but we need to do more. We want to do it. We need to do more now in the short term to act as role models and inspire others to take some actions. And we said we're going to become carbon neutral within a year. And then pandemic arrived, and we thought, okay, we need to invest this because we want to compensate our residual carbon. But we could have brushed this, you know, and pushed it to the right. And I think everybody would have understood because we were in jeopardy, you know, during the pandemic. But we said, no, we made that commitment for the right reason. We're doing it for the planet. And now that we've built in that incentive, the cost of compensation mechanisms are just going up. So, we definitely need to reduce at the source. It's forcing us, but it's also a leadership element. So it's not easy. I mean, of course people are looking at the compensation money. We're putting the money we're investing in offsets or renewable energy certificates. They'd love to have that money and put it elsewhere. But on that, no, you know, we said we're going to do this, and we need to act as leaders and for the net zero commitment that are further out than you need the scope three, and that's a bigger kind of conversation and it takes a bit more time. But I think, you know that the debate about the short term and the long term is what is it that you could do as a company, as business leaders in the short term to make a difference for the environment for the right reason? We all know there's a climate change urgency, so it's good to make some commitment, you know, 20 years down the road, but it's also good to show what is it that we can change and how we can make a difference in the shorter term. And so that conversation needs to happen. But yes, there is an investment and it's not easy. These are not necessarily easy conversations.

Kent Kaufield: I think it's the biggest change management exercise we're going to go through as a global economy. It's not easy by any stretch of the imagination. Jennifer, would you like to weigh in now?

Jennifer Nakata: I was just going to say I completely agree with Helene's comments. And we talk a lot about purpose-led companies. And this is the opportunity to kind of put your money where your mouth is, so to speak, and really show if you if you're a purpose-led company or you are you really prioritizing this and you really putting your investment in it. And I feel like in some cases where perhaps there aren't funds available within your organization to do this, there are still quick wins. There are still things that you can do to help progress where you are today. And I think it's important to find what those are and put some money into advancing those things. And Helene talked about the materiality assessment that you go through. The same thing as for environmental and other areas is there are some big-ticket items that you could probably put some effort into and it would make a bigger difference than you might think.

Hélène Gagnon: In your buildings, energy efficiency. It's typically a good a good chunk of carbon.

Kent Kaufield: In particular, I think for public companies, what our experience would be is where they've declared net zero targets or carbon reduction targets and they're a little bit out. As every year goes by, the markets and their own people in their own customers are looking more closely towards that and saying, show us, are you making are you trending toward the target? So, that might be five or eight years out, but give us a little annual report card so we can see you moving towards that and do it with a transparency and an authenticity that feels real because that does help reconcile a little bit of the short and long term. If you're making investments over the next two or three years to get to a 2030 target. That story is not difficult to tell, and it does help bridge the short and long term. The other kind of conversation we have on a regular basis is when the International Sustainability Standards Board or ISSB finally does start releasing the standards to which non-financial reporting will move towards. And let's say it's two or three years out when they start releasing elements of it, some of the metrics that are going to be in there, like your split of gender, for example, within your organization, you can't change those overnight. Some of these things take multiple years to change or get to a place where you think you should be relative to peers. And we encourage clients to think through what do you want your first full ISSB report to look like, knowing that some of the standards aren't hard to get to, Or we can guess at fair with a fair amount of accuracy because you can start working on what that looks like today, not react when the standard comes out. Another question from our group and from the viewers. You guys are all telling great stories of how you're getting to sustainability. But there are laggers out in the market, parts of each of your sectors that are moving more quickly and might really slow down the transition. What are your thoughts? And I'll be fascinated to hear what you think of this, on more regulation or more government push, maybe incentives to encourage or force laggards in your sectors to move forward. And maybe Helene we'll start with you.

Hélène Gagnon: Well, its regulation is coming, as you said. You know, whether it's the SCC, the Canadian government, I mean, you see it everywhere. And just remember that during the pandemic, I don't know if some of your companies benefited from some of the government programs, but to benefit from some of the more significant subsidy programs you needed to commit or to report on the TCFD, task force related on climate change disclosures, financial disclosures. So, for some companies that were looking at this and they didn't even know, you know, TCFD, what is this? So, I think we are seeing already that to have access to some elements, governments or forcing some disclosure and eventually as a public company, it will become regulated. So, it is coming. So, whether we're for or against regulation, it's coming. It's just a question of time. And companies that are not just looking at this from a risk perspective, but are looking at ESG from an opportunity perspective, will be leaders and those that are managing more like just the risk aspect will be laggards. And then they'll just come in when the regulation forces them to come in, but they'll miss the boat on all the opportunity aspects. And ESG is not just a risk. I mean, there's huge opportunities coming from that. So, it's a question of time. Regulation is coming.

Joseph Cosentino: From my perspective, I agree with Helene. I think the market's going to punish the laggards. Right? I think because you're going to have all this disclosure out there, you're going to be able to compare actions and results much more readily. You know, my one caveat is that I kind of wish that some of these regulators would seek a bit more alignment. You've got Canada, the Canadian securities regulators and the SEC, and you've got Europe doing a whole bunch of things. And they've kind of, you had the ISP that was sort of progressing well. And then you've got all these different elements that all these different regimes that potentially companies have to navigate. It's going to increase complexity; it's going to increase cost. And if you do that, it's much, much harder to get supply chain actors and suppliers on board because it just becomes a bridge too far. So, I wish would sort of have a little bit more interaction with each other than we've seen. But again, I think the market's going to make it very clear who's taking sustainability seriously and who isn't.

Kent Kaufield: I agree. Jen, anything would you like to add in?

Jennifer Nakata: No. Very, very similar thoughts to the other two. It's a combination of the regulations, government programs, helping to provide opportunity for laggards to get involved in. And then it'll be the buying or the purchasing power of organizations that are leading in sustainability and their choices of who they'll who they'll do business with and their value chain that I think will really drive incentive for laggards to take a step forward.

Kent Kaufield: I think you'll continue to see a government policy regime of I call it the carrot and the stick. You know, there'll be some incentives and some programs, but then there'll be some real elements of accountability if you don't do what you say you're going to do. And to me, that carrot and stick approach, you've seen it in a few of the provincial governments. You see it federally. I think you'll see more of that. One more question from what I think was a really good one. We compared all our backgrounds kind of as we're prepping for this. And my experience would be all of our chief sustainability officers in companies we speak to come from a wide range. Some have been in sustainability for 15 years. Some are lawyers, some are accountants that we've repatriated and we're learning new things. How have you built out not only you and your organization, but do you use third party consultants to help you push forward? That's a question for the crowd, I didn't ask, there's no self-serving in that. Do you build from within? How do you kind of get the momentum and the skills to push forward in your initiatives internally? And Jennifer, I'll start with you.

Jennifer Nakata: Yeah, I think it's a combination of all of it. It's recognizing in your organization where you have good talent and good skills that can support it. I feel like even project management capabilities, business process, understanding, these are all key skills likely within organizations today that you may not need to bring in external help for that can be a part of it. But certainly, when you start talking about specific climate-related elements or some of the target setting around climate science, or maybe there's education to be had within the teams or the board or other areas, then certainly bringing in experts or  to be able to bring some of that knowledge to the table, I think is beneficial.

Joseph Cosentino: Yeah. From my perspective, sustainability touches so much, almost everything relating to do with an organization that there's really no one set of skills that will get you there. You need collaboration from across functional groups and different subject matter experts. We've certainly tapped into consultants in terms of setting roadmaps and materiality and new reporting initiatives. So, it's really no one size fits all in terms of building the team, but you clearly need to build a team.

Hélène Gagnon: And you need the right level of support, just as Jennifer and Joe said, sometimes you do need consultants, you know, to help you with your materiality assessment or your roadmap or even, you know, your carbon offset and renewable energy certificates. What difference there are out there, the various prices, various level of recognition and certification. So, and you need a lot of training and education for the various people because everybody comes from a different background, not you're right, you know, so I'm a lawyer and worked in communications also for like 20 years. So, but we have people from supply chain, from finance, from more business and strategy. So, various skills and they're all very valuable. But at some point we need at least a certain level of training and education. Make sure that everybody is aware of the ESG trends coming up.

Kent Kaufield: So within EY Canada, we have the same experience as you guys. We're very proud of our Climate Change and Sustainability Services team. We have been building that group for about ten years. They're small relative to the rest of the firm in Canada. But we say within a few years all of our 7000 client-serving staff will all have to understand ESG and whether it's 5% of what they do every day or 95% of what they do, they're going to have to know that because we'll be embedded in everything we do. Our climate change team and stability will be there as deep subject matter experts to help with, whether it's health and safety issues, whether it's organizational change. But our teams have to embed this in what they do, and that's going to take some time and some effort because we would say, sustainability is everybody's business. It's not just for the experts, it's for each and every one of us to embed it somehow in what we do. Maybe now just pivot because we've got about 12 minutes left. And a couple more questions here. If you had an opportunity to speak to all of the CSOs that are on the call right now, where would you say where would they start in the short term? What would it be? The first two things that they haven't started that they should start out on their ESG program? And what can you do kind of over the longer term? Where do you get started? And maybe, Joe, I'll start with you.

Joseph Cosentino: I think making sure you've got alignment from the CEO and the top management is number one. And then understanding how I think setting targets for your own operations is probably a good place to start because those are areas that you have the most control over in terms of your scope, one and two emissions. And those are sort of one of the first checkpoints that everyone's looking investors and others are looking at when they're examining the credibility, I guess, of your sustainability program. 

Hélène Gagnon: Yeah, I think what Joe said is absolutely right. And of course, everything starts with materiality. So, you need to look at what are the material issues for you from an ISG point of view. So, that's another place to look at. And do a good inventory of everything that you're already doing. So. When I joined see seven years ago, there was no corporate social responsibility report being done. And so, I structured the whole thing, but there was already a lot being done. But people did not realize it, that it was under kind of the corporate social responsibility or ESG umbrella. So, at some point you need to look at everything that you're doing and perhaps structure it from the board CEO down with the governance process, with the committee, with the materiality, and then starts doing a roadmap, setting targets. But at least start by looking at everything that you're doing, and you might be doing more than you think.

Joe Cosentino: I can't agree with that more.

Jennifer Nakata: Yeah, very true. And I know one of the companies I worked with when we were first getting started, if you're not sure what is material for you, I mean, looking at reporting standards like SASB, they can help show you what is material for your sector, which can be a really great start. And a lot of the ESG rating agencies or the scoring third party scoring groups out there. They offer a lot of intel around how they view your company around material topics and how they see your performance based on what your public disclosures look like. And a lot of the information can come free to issuers and to public companies. And so, going in and finding those, seeing where your scores are, that can be a nice sort of first step to kind of understanding what might be material for you or how some of your stakeholders are viewing your process.

Hélène Gagnon: You're so right, Jennifer, but have a look at many of these ESG rating agencies because they don't use the same framework. And under some of them, you could be an A-plus. And under others, you know, same company, same actions. You're a D, so make sure you look at more than one not to be discouraged.

Jennifer Nakata: Very True. Very, very true.

Kent Kaufield: The rating agencies will change a lot in the next five years as the standards become more homogenous and the peer group comparisons become more comparable because they're not right now. And I think for non-public companies out there, you can still take what Joe, Helene and Jennifer said and use it in your own organizations, even if your company is not public. I mean, if your ESG is not directly aligned to your strategy and what's important to the board, and senior management, and where are you going from a vision and purpose. It doesn't matter what you would tackle. It's not going to be successful in the near term. And I also think the materiality comment is very important because you can try to tackle things that might have a high profile but not a big impact and really be thoughtful. And that is where you can actually look at your sector and look at some of those rating agencies just to see what the public companies are doing and what they're valuing, because at least then it gives you some guideposts as to what you might avoid or what you might focus on. One more question from audience is are any organizations doing fully or fully integrated reporting at this stage, or how would you integrate your financial and non-financial reporting?

Jennifer Nakata: So, we do a standalone ESG report currently in some of our other disclosure documents, like our proxy circulars and annual reports and stuff. We do speak to some of our sustainability efforts, but we're not currently doing a fully integrated one. But I think the way, sort of the SEC disclosures that are proposed, and some of the other ones it's really going to start pushing organizations to do that. And I think really being able to understand how some of the impacts of your environmental and social issues affect the financial piece. We'll give guidance to that. And I think the integrated reporting groups and some of the standards that are coming out are providing some tools to help with that, too. So, those are good sources to look into for support.

Kent Kaufield: A great comment.

Joseph Cosentino: We also have a standalone sustainability report, not an integrated report. We do a little bit of reporting of financial metrics when we're reporting to CDP, when you're talking about risks and opportunities and costs, etc.. But it's certainly not the level that would be expected under the new SEC proposed rule where it's audited and has that rigour of an accounting firm looking at it.

Hélène Gagnon: In our case, we at the end of the year we issue separately the MD&A and then we do an annual activity and CSR report. So, it's integrated, but it's not an integrated report based on some of the qualifications out there. But I would say it's more integrated than separated. So, we don't issue the kind of ESG on its own. We try to build it really on the financials and the whole year story with the ESG.

Kent Kaufield: Those are great. So, it's a great question from the audience. And you guys articulated probably the range that we're seeing out in the market. And Jennifer, you had a really good comment. The SEC requirements around climate disclosure and risks, that will add more focus. I think if you're an SEC registrant and your company is SEC registrant. It will cause auditors and management to just home in a little bit on what should be in and what shouldn't be in. Where does that materiality line lie? And I think that'll be a positive discussion even for non-SEC registrants because that will start to set the bar for what it's going to look like going forward. And it is kind of an uncertain time and I know for some of the SEC registrants, particularly those with higher emissions, they're a little bit, I wouldn't say worried, but they're certainly paying attention to it because they're probably a little bit scarred from the early days of Sarbanes-Oxley, where they had to report on controls. And that line seemed to move for the first year or two. And I don't think any of us want to repeat that because I'm still in PTSD therapy from Sarbanes-Oxley implementations like probably many of you guys are. So, we just got a few minutes left and I really want to be conscious that we want to be done at the top of the hour. So, I'd like to do a bit of a maybe opportunity to give a couple of closing remarks to those that are watching and really close with what's important to you, maybe what's important to your team, what's important to your stakeholders. But really, if you leave a final thought to give everyone some inspiration as they go down their own ESG journey and well, maybe we'll go in reverse order from the start. So, Jennifer, please, I'd like you to offer your closing thoughts.

Jennifer Nakata: Yes, sure. Thank you. I feel like your comment about being a journey is probably a super important thing to remember and not to try and do everything at once. Really, you're going to start slow, and you're going to build and find momentum and it's going to be really successful. So if you're just getting started out in ESG, not to be afraid to be too overwhelmed by everything that's out there and just take it one step at a time.

Kent Kaufield: Very good comment. It is true. It's my learning in the first year is that everyone wants to understand it. Everyone's trying to figure out what to do with it, but no one really knows how to get started. And I think it is definitely a journey. Helene?

Hélène Gagnon: Yeah, I would say don't wait for the regulation. As we said today, regulation is around the corner on ESG, so act as a leader and embrace ESG as an opportunity. Don't look at this just ask risk management, or it needs to be completely integrated with your strategy. But look at it from an opportunity point of view. And there's a lot of opportunities in ESG. And so don't wait for regulation and be role models by leveraging those opportunities.

Kent Kaufield: That's great. And you guys are all definitely role models in what you're doing and how you articulate your story. So, you're leading by example and Joe?

Joseph Cosentino: Yeah, I think from my perspective, I think no matter what size of the company, whether you're public or not, we're all in the same supply chain. So, you're going to be pushed or pulled into the direction. So, it probably makes sense to sort of try and establish your own sort of pathway if you can.

Kent Kaufield: Yeah. It's a great comment. The analogy I kind of use sometimes is when the SEC was formed in the 1930s, there was a lot of opponents to it. They couldn't figure out why anyone would want to have more transparency or disclosure around public information and why investors would need that. You should just trust the CEO. And it took almost 20 years for generally accepted accounting principles really to take place. And then the audit transparency around it. ESG is probably the most significant change in terms of public company reporting since the formation of the SEC and generally accepted accounting standards in the thirties and forties and fifties. And we're all in it together. And I think for the A&M crowd, you've got three great examples of three companies who are trying to lead by example, who are starting on a journey, who are learning as they go and who aren't waiting. And I think that's a really key message is they're not waiting and comment that I really like, Helene is that most organizations probably do more of this than they think, and they just haven't ever wrapped it up together in a fashion that is in one place. And it's very powerful when you do that. And it's also powerful if you do an inventory and it's not what you thought it was going to be. It sets a certain direction. So, great advice from the crowd. Joe, Helene and Jennifer, thank you so much for your time, your contribution, your enthusiasm, your passion. Going from lawyers to CSO. The transition that you've done personally is quite amazing to it. I think you are at a personal level leading by example as well. So, we're right at the top of the hour to the A&M crowd. Thank you all for attending. If you have more questions, please send them along. We're happy to respond to them. And I hope you all have a terrific end of your day on Thursday. Thank you very much, everyone.