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ESG: The Intersection of Knowledge and Tradition


Episode 776 06.21.22

Matthew Sekol, trade advocate, worldwide sustainability, Microsoft, joins Peggy to debate ESG (environmental, social, and company governance) and the way Microsoft intersects in various methods. He explains the significance of each information and tradition to make a distinction with ESG and shares how know-how may also help handle carbon, water, waste, and ecosystems.

Under is an excerpt from the interview. To hearken to the dialog from The Peggy Smedley Present, click on right here or go to https://peggysmedleyshow.com/ to entry the complete present.

Peggy Smedley: Matt, we now have so much to speak about at the moment and I believed we’d begin simply by speaking about why you’re so obsessed with ESG?

Matthew Sekol: Properly, , Peggy, you probably did a extremely nice job, I considered introducing my background, however in the end in case you learn into it a bit bit, I may by no means determine what I wished to do with my profession.  I graduated with an English diploma and went into IT, supporting all the good industries…. And I got here into Microsoft about 4 years in the past and after I arrived, it was my first foray into monetary companies. And I bought segmented into capital markets and I began supporting a few of these clients who have been centered on ESG from the market perspective. And so, like I are likely to do at any time when I discover one thing new, I immersed myself in that matter. I listened to podcasts, would learn articles, have interaction folks on social media about it, and attempt to study as a lot as attainable. And I ended up realizing that there was a giant disconnect on the time between the best way that markets have been their investments and what these investments, or mainly the businesses have been excited about. And so, I began speaking and exploring with firms what ESG meant to them. And I discovered that in lots of circumstances, it didn’t imply something to them. Then COVID hit, and the entire thing accelerated, and I discovered myself in an fascinating place to form of bridge the hole between the markets and the corporates. And that led me to the position that I’m in at the moment.

Smedley: Matt, I discover that so fascinating as a result of I do know you wrote a whitepaper and even within the whitepaper, you indicated that solely 54% of boards consider that ESG issues and has a monetary impression. I imply, simply listening to you speak passionately about that signifies why you see there’s a lot extra that must be accomplished once we have a look at all of the verticals on that. So, in what approach then, speaking about what you simply indicated now’s Microsoft serving to firms perceive ESG as a result of there’s so much, I feel, to essentially discuss and even form of delve in additional.

Sekol: Completely. There’s a lot to cowl this. So throughout environmental, social, and company governance, Microsoft intersects in various methods and we broke it down into three broad classes. First off, once we develop our merchandise and options, particularly our cloud options, they’re designed with sustainability in thoughts. And this comes via in each our sustainability reporting, in addition to we give our clients instruments to measure their carbon emissions based mostly on their utilization of these cloud platforms. The second class is that this product and form of common challenges is the best way I like to consider it. So, these are issues like measuring your carbon discount, which we do with the Microsoft cloud for sustainability, which I’m certain we’ll get into, but it surely’s additionally issues like how collaboration instruments can be utilized to foster an awesome worker tradition, reducing attrition. I imply, that completely hits the S after which this final class is how we work with our companions and even a few of our inner companies organizations to construct options that concentrate on extra materials points, as a result of each firm has distinctive and bespoke points that intersect with ES and G that they should remedy for their very own enterprise. And so, we work with our companions to attempt to pull collectively our cloud know-how to unravel these challenges.

Smedley: It’s fascinating. Once I hear you discuss that, as a result of once we take into consideration simply product, once we take into consideration companions, you consider all of these issues, they intersect with every little thing. And, what makes me so intrigued by that is that I’m now in, how will we really pull all of this collectively? And also you talked about it Microsoft’s cloud for sustainability. I feel it comes into play even while you talked about how the sustainability supervisor matches in right here, as a result of I feel that’s in infrastructure. And I might love so that you can clarify that as a result of I feel all of that integrates collectively, and I feel that’s how we now have to construct once we take into consideration collaboration, as a result of that’s the piece the world comes collectively proper now?

Sekol: Completely carbon is basically an enormous focus for each enterprise. We’re seeing a whole lot of draft proposals from world organizations and requirements our bodies, just like the SEC, the EU fee, the brand new worldwide sustainability requirements boards which can be attempting to prepare round carving local weather danger to start out. And so, Microsoft has been on an extended sustainability journey, and we’ve put collectively a product based mostly on the learnings that we’ve had in managing our advanced world group. So, like lots of our clients placing collectively a sustainability report, it takes speaking to enterprise items, gathering metrics and information silos, after which cobbling them collectively in Excel spreadsheets, placing them maybe in case you’re fortunate into some type of information lake within the cloud after which getting it out into the report. And so, we constructed this product referred to as the cloud for sustainability, to be a SaaS providing, to assist our clients set up round that information. And the primary module simply went GA on June 1st is known as the Microsoft Sustainability Supervisor. And it’s actually centered on serving to our clients report, report, and scale back their scope one, scope two, and a few of scope three class metrics. And now at Microsoft, we consider that know-how can play the most important position in serving to corporations handle their carbon, water, waste, and ecosystems. So, that is simply the primary module in what’s going to be, I feel, a extremely fascinating product that’s going to assist companies perceive their operations in a brand new approach.

Smedley: Let’s unpack that a bit bit as a result of I feel that’s the place we, once we take into consideration attempting to report, report, extracting that info, we get misplaced generally in information, we talked about this a lot on the present that information, information, information, and actually attempting to speak about how do you have a look at information? Can we delve into that a bit bit extra and once we need to scale back our impression and why that’s so necessary at the moment? I feel a whole lot of us perceive it, however how do we actually go about it will get a bit trickier, proper?

Sekol: It completely does. And what’s fascinating to me is the way it builds on the digital transformation story. That’s frankly been talked about since I attempted to trace down the start of this, I feel it was 2014. Actually, once we’re speaking about this huge information problem, what I see on the market with my clients is that they’re attempting to tug out insights from a whole lot of legacy techniques and a whole lot of legacy enterprise processes that haven’t been modernized. And I’m not saying the cloud is sort of a silver bullet to repair these issues, however looking at your operations and beginning to modernize them in the best way that enables for these nearer to realtime information to be pulled out and aggregated up, particularly and shared throughout your group, which is one thing that frankly, a whole lot of enterprise items inside your organization will not be comfy with or accustomed to doing, is a large step in gathering this information. So, I see a whole lot of clients at the moment, once more, attempting to tug collectively disparate techniques painfully with out placing in that legwork to modernize these techniques first. However Peggy, I feel you introduced up a superb level. Knowledge isn’t going to essentially remedy every little thing. And this was put, this little story was put to me by, uh, any person who’s working in non-public fairness, um, as a result of I discussed information to them and so they stated, nicely, if I’m working a logistics firm, and I’ve paint on the underside of certainly one of my ships that’s leaching into the ocean, information’s not likely going to repair that downside. Proper. I would like any person who’s there it to know what the difficulty is. I must dry dock that boat, get the paint off and repaint it. Prefer it’s not essentially an information downside. The info may report that that venture was accomplished on the finish, and perhaps may quantify the quantity of paint that we stopped leaching. That’s not essentially going to repair it. So, information is nice and it’s going to floor insights. It’s not going to be a silver bullet for all your ESG points although, you actually need the tradition to know a few of these challenges that your distinctive enterprise has and floor them in the correct strategy to the leaders to take motion.

Smedley: So actually what we’re speaking about. So, we perceive the info. So, we’re saying, okay, we have to have a look at it. In order that’s the place, however then we now have to consider, you’ve bought to empower that group to know it. So, I feel that’s what you’re saying, proper? So, if we’re empowering companies and organizations, and I all the time say, anytime you’re going to alter, it’s bought to start out with the highest down. Would you agree? I imply, as a result of when you empower these organizations, they will speed up their sustainability efforts to progress enterprise progress. That’s what you simply described. I can’t repair the leaching. I imply, I’m going to do this, however then you definitely simply remedy, you set a band support on an issue. You haven’t seen the expansion that’s going to occur. Is that what you’re saying?

Sekol: Proper. Yeah. So, let’s say that you simply’re a sailor and also you discover the leaching subject. In case your management doesn’t respect what that really means and is prepared to take a position the time to dry dock that ship and get their subject remediated, they’re risking potential authorized charges or regulatory charges down the road. You actually need your management on board. Now I do see this rising in a pair methods, relying on the corporate tradition. There’s a floor swell proper now of staff who need to make a distinction in it, frankly, at a quantity that I’ve by no means seen earlier than. And so only for instance, I’ve been in my present position at Microsoft for 3 months, I joined the sustainability crew trigger it’s a brand new crew. I’ve by no means gotten so many attain outs from throughout Microsoft and out of doors the corporate of people who find themselves working at firms who need to be a part of a crew that makes a distinction. It’s unbelievable. So, there may be this bottom-up form of motion, however in case you can’t persuade the board and your management crew that that is one thing necessary … what I actually advocate is in case you’re on this scenario, get the info, as a result of the info’s going to be the proof that it’s worthwhile to persuade any person that there’s both some type of enterprise danger or doubtlessly, at worst case, a monetary danger in a regulatory wonderful or misplaced enterprise or one thing, and actually attempting to persuade them. I do know it sounds robust, and I’ve been in that scenario, working in IT and attempting to persuade leaders to do cyber safety initiatives, for instance, it may be arduous, however in case you’re passionate, put the trouble in, and with the market stress we’re seeing, I’m actually satisfied that your leaders will step up and begin paying consideration.

Smedley: However we’ve seen from historical past that in case you don’t have a look at the environmental impacts of what we’ve accomplished to destroy mom earth, that we’re going to repeat the identical errors. So, what you’ve simply described is perhaps there’s this floor swell of this new technology of employees which can be saying, we’re not going to take it anymore. And we’re going to encourage our administration and our leaders to say, look what’s occurred. In order that’s an fascinating level that you simply simply made is so whether or not it’s in oil and fuel, whether or not it’s in manufacturing and we’re altering it to sensible manufacturing amenities, we’re seeing this groundswell. So which means you your self at Microsoft have needed to undergo this transition. So, there’s examples now of studying from our previous errors and saying we now have to do higher. So, I might say it’s important to have empathy for patrons who on their very personal have needed to expertise among the points. I might think about you’re attempting to assist firms undergo and undergo their very own carbon objectives. So proper now, it’s not such as you’re saying, look, I’m advising you to do that, however we don’t know the way to do it. We’ve needed to chug alongside and expertise this and say, we’ve needed to do carbon and water and waste the ecosystem. So, I might think about you’re saying, look, we’ve needed to study to do that, and we’re nonetheless studying every single day, and we now have a groundswell of staff who need to make a distinction. So, you’ve gotten it from a tug, push, pull, all alternative ways too, as Microsoft.

Sekol: You’re completely proper. In actual fact, there’s two issues I’d name out. One is we now have been on this journey for over a decade. And so, we do have a whole lot of learnings and actually when COVID hit, all of those ESG points actually got here to the forefront. And so, what occurred was our inner environmental sustainability crew, which is targeted on these points for Microsoft, actually was underneath intense stress to fulfill with clients and attempt to assist them perceive what our journey was. The stress was so nice that management checked out it and stated, what? We form of want these of us centered nonetheless on the interior stuff. It is a journey. It’s not, , as soon as and accomplished. They should hold working. We have to construct groups to deal with sustainability as a subject for our clients, which is precisely the crew that I’m on. Like I’m buyer dealing with. I inform our story. I attempt to align our journey to our buyer’s journey. In actual fact, I had a buyer the opposite day say after I described how we do our reporting, they stated, wow, I actually see us in your journey. And I really feel like we’re perhaps six months behind you is how shut he even noticed his crew. However the second factor I might say is at Microsoft, we now have a superb tradition of issues like worker useful resource teams for a variety of matters. And a kind of worker useful resource teams is targeted on sustainability. And that is the place a whole lot of that zeal comes out. These are usually staff who’re excited about methods to assist their clients or enhance their merchandise, as a result of , we now have a whole lot of engineers, alongside the strains of sustainability. And so, lots of of individuals will come collectively each month and speak concerning the newest sustainability matters, and we now have presenters and there’s an awesome article on our Inexperienced Tech Weblog by a buddy of mine named Drew Wilkinson that talks about how one can construct that type of sustainability group in your enterprise. So sure, we now have tons of classes discovered. It’s not solely centered on the tooling, proper? It’s all features of the enterprise as a result of we’ve been there, and we’ve remodeled.

Smedley: We’ll discuss examples in a second, however what you’ve simply stated is that this accountability, it’s a transparency, it’s accountability. So, firms who’re going via this, they’re studying it and it’s a price chain that has to happen; it’s collaboration. However that’s what you’re seeing that perhaps they didn’t see earlier than, and that’s a great factor, and that’s part of the journey that they’re going via. Is that right?

Sekol: Yeah, give it some thought this manner. Think about if each worker in your organization and I’m not saying each worker is curious about sustainability …

Smedley: Not all people’s on board, proper? Not all people immediately. You’ve bought to convey folks alongside progressively; it doesn’t occur in a single day. I imply that I’m being sincere. Proper? We’re attempting to get folks to know as a result of everybody’s like I’m leaping on board and saying we’ve bought to alter local weather change right here. And all people believes it as a result of everyone knows not all people believes on the similar time.

Sekol: Proper. You’re precisely proper. So, all people is a hyperbole for certain. However let’s say that you simply had a big group of your staff who actually wished to make a distinction and began on their very own time, understanding sustainability points. Now take into consideration what which means for you as a enterprise proprietor. You now have any person who has taken the time to discover an space of ardour, however who additionally understands how your enterprise works. When you consider monetary companies, organizations, clients of your enterprise, different stakeholders, the communities by which you use, that worker useful resource is immensely beneficial and crowdsourcing concepts from these staff is big. What’s rising is that this fascinating, like sustainability experience that all of the sudden all people wants, however coincidentally staff are ramping up on their very own as a result of they’re obsessed with it. And so they’re attempting to determine methods to combine it into their enterprise.

Smedley: Are we really seeing by doing that and perhaps that is the place the instance is available in that by doing this, you’re really seeing operational enhancements, operational enhancements to that you simply’re lowering your carbon footprint a bit bit at a time. Is that what firms are attending to see and say, look, we’re lowering some waste? We’re not utilizing as a lot water. We’re seeing actual adjustments that make a distinction. Not solely in us, however in our suppliers, within the materials use, in general waste. Is that the place you begin saying, wow, we’re doing one thing that may obtain new carbon objectives?

Sekol: Proper! That’s precisely the hope with a device just like the Microsoft Cloud for Sustainability. It’s nice to prepare your information. Just like the recording and reporting out, particularly our stakeholders, (it’s) completely vital for them to know the way you’re addressing these points. However you really want to handle these points, which is the third factor that we deal with, which is the discount. As a result of one of many issues that we don’t need, I don’t suppose anyone who’s centered on sustainability, or the local weather, or the setting desires to see is a bunch of numbers. No one desires to only see the numbers as a result of measuring can shortly turn into an excuse for inaction. And stakeholders will sniff that out. If you happen to’re reporting your scope three and 12 months over 12 months it’s similar, they’re going to know that you simply’re not doing something regardless of commitments that you simply made. So, and there are folks, your stakeholders at the moment are scrutinizing this info to attempt to determine what you’re doing as a enterprise, anyway. I imply, Microsoft, even in our newest sustainability report, we brazenly admit that our scope three went up due to our continued cloud successes, in addition to elevated gadget utilization like Xbox throughout COVID. And we’re taking steps to attempt to remediate that scope three improve and convey it again down. And it form of confirmed us that this isn’t actually going to be a linear journey, however we have to hold at it as a result of we’ve made these commitments and we have to meet these commitments as a company.

Smedley: So, while you have a look at that and also you say, okay, we’re utilizing a device, that’s going to offer us insights…  And we’re seeing the place we’ve bought to make enhancements. Is the development simply with Microsoft or is it all people within the collaboration of all of the companions which can be part of this and that’s what clients and companions want to know?

Sekol: Proper! You’re precisely proper. It completely takes place for a lot of firms, together with Microsoft, a lot of the carbon emissions occurs within the worth chain. In different phrases, the impression that your organization has as a result of it exists, actually sits with all these different organizations which can be supporting your enterprise. And so, in a whole lot of circumstances, it requires working with suppliers. Now it’s not each trade. I imply clearly oil and fuel, proper? And even monetary companies prefer it’s for monetary companies, it largely sits of their investments in what’s referred to as scope three class 15, which is financed emissions, however many, many firms, it’s your provide chain, it’s your worth chain.

Smedley: Is there one group or trade that’s going to see fast success over one other? Once we discuss examples, are some industries immediately leaping and saying, we see on the spot outcomes, and different industries are saying, that is going to be so much tougher?

Sekol: what? I don’t see industries rising like that. Each buyer that I speak to has distinctive challenges round carbon, particularly, however the broader local weather danger and environmental danger social justice points. However what I might say is it’s rising as a problem for mid-market and small and medium enterprise firms. And the reason being just like what I noticed again when I was at a Microsoft associate. It’s as a result of a whole lot of these firms don’t essentially have experience on this space. And so, if you consider a 500-person firm—to the sooner level—you could not get all people sustainability and you could not be capable of crowdsource that sort of knowledge, as a result of you’ve gotten 500 staff, they’re in all probability centered on working the enterprise. So, it’s much less about which industries are going to unravel for this. It’s extra, I see the large gamers attempting to impression their worth chain, that are a whole lot of mid-market and small medium enterprise, however I see a whole lot of these mid-market small, medium companies form of struggling. What huge firms are doing although, is that their procurement groups or their provider groups are mentoring these mid-market and smaller firms and saying, look, that is how we have a look at this, this is the reason that is necessary to us, and right here’s what we predict you need to be doing. It’s similar to what frankly, what I feel it’s just like is what monetary companies corporations with stewardship groups are doing to their investments. They’re bringing them up and saying, hey, we need to get these carbon numbers, we predict you’ve gotten this local weather danger, we predict you need to be doing this, however so it’s much less about trade, and I’d say it’s extra about dimension proper now.

Smedley: And once we have a look at that, ought to any dimension firm be afraid of sustainability, or ought to they are saying, no, we’re all on this collectively?

Sekol: I’d say any firm must be it whatever the dimension and seeing what they might do. It could be that the dangers aren’t as nice, however take into consideration, I dwell in a fairly rural space, and we now have some native espresso outlets that aren’t chain centered. For them, supply, like sustainably sourcing their espresso is a large subject as a result of, with local weather change, there’s all types of points round espresso beans, as I’m certain a whole lot of listeners know, for a small espresso store that would doubtlessly be a deal breaker for them, if they will’t determine a strategy to discover a sustainably sourced farm, or a farmer that understands the impression of local weather change and is trying to remediate their danger, they’re going to be out of enterprise in a pair years. So even on the smallest scale, it’s worthwhile to be excited about this. How is the local weather going to impression you? What sort of adjustments are you able to make as a result of your clients could care as stakeholders, , are you placing that further paper sleeve in your espresso cup, or is there a greater strategy to do it? Are you utilizing one-time plastics, or is there a greater strategy to do it? There are all types of angles that must be checked out with this.

Smedley: And that’s an important factor is it’s important to have a look at belongings you won’t have checked out earlier than to be probably the most profitable group will be even, with their staff. And that leads me an important query I wished to ask you, which might be going to be a tricky one. What’s your imaginative and prescient when you consider, as a result of it turns into funding, it appears at every little thing for ESG and sustainability. I feel within the subsequent decade, we take into consideration the place we’re proper now, however ought to we be addressing perhaps a world normal, not simply issues so narrowly, as a result of I feel we right here in North America take into consideration the best way we do issues right here, however we actually must be this from a world perspective as a result of we now have to consider forests, we now have to consider the water, the oceans, what we’re polluting, the setting, CO2, we now have to consider every little thing. And I feel generally we don’t understand it is a world effort, however I assume for you, somebody who’s it day in and day trip, and what’s your imaginative and prescient for this? And I do know it’s an advanced query. I’m not going to allow you to off the present till you actually get an opportunity to assist us perceive that as a result of that’s how we will make change.

Sekol: So, I’m an enormous fan of science fiction. So, this reply probably sounds a bit science fiction, however I’m going to try it anyway. In the long term, the requirements will assist, definitely, streamline how we have a look at the impression that companies and governments of the world are having. However what we have to get to is a degree the place we’re actually digitizing the best way that we do enterprise to all sing from the identical track sheet. All of us want a standardized approach, not solely of reporting environmental, social, and company governance information in a standardized approach, but additionally determining what are the digital requirements that layer on prime of this, in order that if I’m one massive retailer, and I would like to determine what the merchandise degree carbon disclosure is of all my merchandise that I promote, it’s no totally different than my competitor, as a result of it might probably’t be. I feel even Gary Gensler, the chairman of the SEC had this analogy of like milk. Like, , what 2% milk is, proper? Prefer it exhibits up on the carton, even like the colour is normal and on meals, we now have issues like standardized substances. Like it’s worthwhile to virtually have these requirements, however have it digitized in a approach that we will do evaluation to determine the place are the areas that we will make enhancements. And so, , at Microsoft, we now have this concept of a planetary pc, which is basically centered on pulling collectively the biggest environmental information units and democratizing them for patrons and researchers and all types of individuals to have a look at. If I used to be going to color a imaginative and prescient, it might be some type of secured worth chain globally that everyone has entry to, and so they can unlock it if it’s related to them and get the data and do the analytics to essentially make higher selections and assist us meet our local weather objectives globally.

Smedley: Is it real looking for us to hope for a democratized safe worth chain within the subsequent decade? Is it real looking that we will hope for that?

Sekol: Is determined by who you speak to in my household, I’m normally an optimistic individual, however not all the time. I wish to suppose it’s attainable. And the reason being as a result of it virtually must be, we virtually must get all people on board on this approach, in order that we will make extra clever selections. I imply, 70% of products come via the port of Los Angeles and we noticed what occurred when COVID impacted the port, proper? Then we noticed the president are available in and say, nicely, we’re shifting to 24/7 operations. That may be a precursor to what we’re dealing with. And if we will’t get all people on board, if we will’t provide you with artistic options as a planet to handle these sorts of complexes, I imply, evergreen, the evergreen ship, similar factor. Like if we will’t provide you with higher methods to handle these crises that emerge, we’re going to be in some severe hassle within the subsequent 50 or 100 years. And granted, I’m probably not going to make it one other 50 plus years, however I don’t need to go away my youngsters with this downside. Like I need to begin engaged on it now, and that’s circling again to the start of the dialog. That’s form of what led me right here.

Smedley: And that’s the purpose, Matt, we have to go away our planet higher than the place we got here into it. I really like that time that you simply simply made, Matt Sekol, trade advocate, worldwide sustainability at Microsoft. Thanks a lot to your time. In the present day’s been an exquisite dialog. The place will we need to ship any of our listeners? The place can they go for extra info?

Sekol: Good. If you happen to’re curious about studying about what Microsoft’s doing with sustainability, go to microsoft.com/sustainability.

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