Episode 23: Redefining Purpose With Your Commitment to ESG

Transcript

0:00 – 0:0:33
Chris Thornton

Change@Work is a podcast about the ever-evolving world of work and the human behaviors that drive it. I’m Chris Thornton, Senior Principal here at Daggerwing Group. Together with partners, clients, and leading experts from a variety of industries, we’ll share what’s happening in the world of work, how leaders can prepare for the future, and how to engage employees along the way.

0:33 – 0:54
Chris Thornton

Joining me today is Sandy Skees, Global Leader of Purpose & Impact at Porter Novelli, where she helps brands integrate purpose with ESG and justice, equity, diversity, and inclusion programs, to create a more equitable and regenerative world. Sandy is also the author of an upcoming book on purposeful brands and what it means for an organization. Sandy, welcome!

0:54 – 0:56
Sandy Skees

Good to be with you, Chris.

0:56 – 1:02
Chris Thornton

I’m so glad to talk with you, you’re one of my favorite people. Michelle Mahony and I are big, big fans of yours.

1:02 – 1:03
Sandy Skees

Back at you.

1:03 – 1:13
Chris Thornton

Thank you. Sandy, we’re all about focusing on people, so I’m just going to ask a couple of questions to get to know you better. Is there a product you couldn’t live without?

1:13 – 1:48
Sandy Skees

Yes, it’s my French press. If I don’t have my cup of coffee in the morning I’m lost. And that’s true for work days, it’s true for vacation days – I just got back from 10 days of camping in the wood of Oregon and camping (we have a little teardrop trailer) – my French press was an integral part of every morning. Waking up, boiling some water, make myself a cup of coffee, so can’t live without that.

1:48 – 1:55
Chris Thornton

Yeah, I’m onboard with that. Alright, what’s the best meal you’ve ever had? Does one meal stand out?

1:55 – 2:44
Sandy Skees

Um, last Christmas time (last winter), we got together – my wife, my two daughters, and my daughter’s husband, and continued for the second year, what is going to be a family tradition thanks to my daughter marrying a nice Italian man. We do a Feast of the Seven Fishes. We’re all foodies, we all love to cook, so we had seven courses of various seafood items. We stayed at my daughter and her husband’s house, so sitting around that table eating our feast and being together after having such sporadic times (able to be together over the pandemic), that stands out as one of my favorite meals ever.

2:45 – 2:50
Chris Thornton

I love that. You said you made the dishes – do you remember what you made, or what you were involved in making?

2:50 – 3:23
Sandy Skees

Well, I had just learned how to shuck oysters, so I volunteered to go get – we were in Seattle, we drove to a really great fishmonger – and I shucked and made this really delicious mignonette sauce (I think that’s how you pronounce it). So, that was my contribution, but we had squid ink pasta was another one, we had shrimp dumplings that my other daughter made, and yeah, we just ate a lot. It was great.

3:23 – 3:30
Chris Thornton

That’s awesome. When you think back as a child, do you remember if you had a dream job?

3:31 – 4:11
Sandy Skees

When I was really little, I thought I wanted to be a doctor. And I kind of always – that was sort of the thing I told people I wanted to be when I grow up, till I got to college (or actually it was high school chemistry, was the beginning of a dose of reality casserole as my friend would say), but I do think this sense of healing people in the world has stuck with me so, yeah. As a child, I wanted to be a part of making things better. I like to think I’m still living out that purpose as a life practice even now.

4:11 – 4:32
Chris Thornton

I think so. We’re getting ready for the podcast and thinking more about your book that you’re writing about purposeful brands and how it relates to sustainability strategy, DE&I, ESG performance, etc., that’s definitely part of making the world better and healing – what’s your biggest takeaway so far from writing this book?

4:32 – 7:15
Sandy Skees

I guess my ambition with the book is to show communicators, marketers, brand strategists, product designers, and even sustainability strategists the interplay between purpose and sustainability and DE&I and communications, and why communications is an integral part of that kind of change. So, I like to start by just saying here’s how I define purpose – purpose is the greater good that a company wants to create in the world as a business. So there’s what you make, and how you make it, and who you make it for, what you make it with, what happens to it after it’s done – those are all big questions that brands and companies need to ask themselves. And when they answer those questions, they’re moving toward an articulation of their purpose, because what you make, and how you make it, and who you make it for says a lot about the purpose that a brand has – the greater good that it wants to create in the world. Whether that’s helping creative regenerative and restore planets, sort of the flourishing environments, or it’s understanding there are inequities in the world and society, so you’re going to apply your company’s resources. Your supply chain, your supplier diversity program, who you market to, which customers you don’t leave out – all of those can become social fabric strengthening decisions you make as a company and says you know what, if we just give everything working together, we can make the world a better place. So, that greater good we want to create. And then I like to say sustainability strategy is the broad way a company articulates how it’s going to manage its environmental and social footprint in context of the economic viability and thrivability it wants. And then ESG sits below that (environment, social, governance), that’s just the programmatic tick away at the targets you’ve set, it’s the programmatic way you’re going to deliver all the way up to that highest purpose. So for me, the book has been a great way of refining a language that I hope is accessible for all those of us in this profession, that it helps us integrate a purpose, a environmental and social outcomes in the ongoing language that we use when we talk about products and brands and companies, and it just becomes a vernacular that we’re all more comfortable of having of one another.

7:15 – 7:37
Chris Thornton

Sandy, that was lovely. That was wonderful. So let’s focus in on ESG specifically for just a little bit, it’s really clearly becoming one of the biggest business must have things that you’ve got to think about now. What do you see organizations focusing on, what are some of the challenges you see them facing?

7:37 – 10:10
Sandy Skees

Well, as somebody whose been doing sustainability strategy for almost 15 years, what I can say is that ESG is the latest term that has risen in popularity to try to put some language around all of this that we’re talking about. So, it’s the term du jour and my sense of it is it’s too prescriptive. I guess what I would say is ESG (environment, social, governance – that’s what ESG stands for), is programmatic. Sustainability, which has always been environmental and social and prosperity, sits above that and that’s strategic. Then that links up even higher to purpose, which is that poetic expression, that North Star, that sense of ‘why’ that a company has to have. So let’s go back down to ESG and say, well why is it getting so much attention right now? And it’s because Wall Street and investors have finally come to realize what those of us who have been doing for decades understand, is that when a company manages, carefully, its environmental footprint and its integration into societal programs and systems, they’re better run companies. So, a company that manages its material resources, the materials it needs to make what it makes (with more efficiency, more thought, more care) for example if you design in more benign chemicals, it means that you have less operational complexity getting rid of the scraps of it when you’re done. All of those are well managed companies. If you pay attention to the diversity of your workforce, not only do you get a wide range of thinking, you get people who stay longer – and having had many conversations with Wall Street analysts in the early days when ESG was rising, I asked why, and they’re like well, social sustainability matters because we’re looking at stability of workforce. We like backing companies who don’t have high churn in their employees, who they’re constantly replacing employees. So once again, ESG has just become shorthand for well-run companies who are managing more than the financial side of their business – they’re managing its environmental and its social impacts as well, and collectively, we’re finding that those companies are outperforming the market.

10:10 – 10:18
Chris Thornton

That makes sense. When you add in the governance component, what is unique about the governance component? You covered E, S so well – let’s get to G.

10:18 – 11:33
Sandy Skees

Governance is simply ‘does your company, have in place, the systems, the policies, the quarterly review?’ So, you’ve made these environmental commitments, you’ve made these social commitments around diversity or inclusion and equity – now is there a policy that’s supporting that. What Wall Street is looking for is you say all these things, do you have governance in place? Do you have policies, procedures, systems for measuring, systems for tracking, systems for reporting back on how you’re doing. If you want to compare the financial dimension of a company, governance is the generally accepted accounting principles (GAAP) that all companies agree to adhere to when they report to how they’re doing financially. This is just saying are we using GAAP that haven’t been regulatory required yet. But using best practices for reporting, what our environmental footprint is, what are strategy is around equal pay, or some of the other things that we’re doing from a diversity or inclusion perspective.

11:33 – 12:15
Chris Thornton

That’s so interesting, and I’m going to make a connection, so tell me if I’m wrong please, or if I’m partially right, is that what investors are looking for (and eventually what consumers downstream may be looking for is predictability – can I depend on you, are you going to do this for the long-term or should I expect you to change strategy when it’s convenient for you? Am I placing that right about long-term commitment to doing what’s best or predictable?

12:15 – 13:17
Sandy Skees

I think predictability is important to Wall Street. Doing the right thing for its own sake is probably, at least our research shows (Porter Novelli) we’ve been studying consumer attitudes for many years specifically around climate commitments and social justice commitments – certainly we’ve been doing this almost quarterly since early 2020 and data says that consumers in particular – they want to buy a product that isn’t harming the world in the way in which it’s made or used (and not only harming the world, but not harming themselves or their families). Secondarily, they want to know that the company that’s making it also isn’t harming the world and harming society. So, I’m not certain that from a Wall Street perspective that those kinds of aspirations are important, but the predictability of programmatic approaches to environmental impacts and social impacts is what Wall Street’s looking for.

13:17 – 14:18
Chris Thornton

We had a guest on the podcast from Moody’s, and it does feel like there’s a movement forward in rating organizations – and I won’t get too detailed into it, but that rating organizations on their commitments, on their performance in these areas is going to, I think we can expect it to be the norm. When you think about, and tell me Sandy if this is too far of a connection, but when I look at what’s happening in Europe with some of our clients, or US and I’m going to be very general on that nuance is what matters here (apologies I’m not going to bring it), but when I think about consumer choice and what drives decision making and purchasing, I’m not sure ESG is as strong in the US as it is in Europe. Is that a fair generalization or am I missing the point?

14:18 – 16:40
Sandy Skees

No, you’re absolutely right. We have purpose and impact group in our London office and their work with Europe based companies – those headquartered there, or you know, we work with companies based in Sweden and in Germany and in London, and there’s two reasons I think – certain European countries, because of their size and scale, have been able to set more rigorous environmental regulatory frameworks that companies must adhere to. And then that creates expectation on the part of the consumers. You know, Germany is renowned for its use of renewable energy, which has created an expectation among Germans that they should be able to acquire renewable energy and purchase it for their homes etc. But because the scale of the country, I think is part of the reason. So, in aggregate, more and more countries across Europe are further ahead than here in the United States – I’m sure there’s a lot of reasons we could think why that may be so. So, I would say from a consumer perspective, consumers have a higher bar that companies have to meet in and around the EMEA, although more and more companies and regulatory bodies here in the United States are looking at the frameworks – specifically legal frameworks around carbon emissions, waste and water, and things like that and beginning to say ‘you know what, US ought to emulate what’s happening.’ And frankly, many multinational corporations are asking for the same thing, which is ‘well if we have to meet this rigorous standard here in this area, let’s just do it everywhere.’ I live out in California and it’s why many times people say whatever laws California passes, eventually become the law (or at least become the de facto standard for corporations when it comes to water quality, air quality, things like that, because we’re such a big market that if you’re a manufacturer – if you got to do it for the California population, you might as well do it for the whole country). It’s not as simple as that, but that’s a pretty good analogy, it’s an analogous way of looking at it.

16:40 – 17:02
Chris Thornton

And so we can start to, asking you to predict, do you think that with more adherence to particular standards (or standards that are driven out of the EU or the AMEA region) do you think that consumer choice within the US will follow or are we just too far out from knowing that?

17:02 – 19:05
Sandy Skees

No, I think (I’m going to come at this story a little out of left), 20 years ago I was in an executive retreat education week and it was around the same time that Facebook was launched and Facebook hadn’t been out there very long, but we were beginning to see evidence that a cohort that was using Facebook was starting to get some sort of similar world views regardless of what country they were in. And I think that we can say that now, from a global age cohort, there’s a lot of similarities in Gen Z for example, regardless of what country they’re in. So, it’s why individuals like Greta Thunberg has such high visibility across her age group globally. Because we now have this mechanism for everyone to be united and there’s forming a world view that’s more generationally oriented than country identity. So, I say this as backdrop – what we can tell in the research we do is that there’s a mindset that Gen Z has about the expectations of companies who they work for, whose products they’ll buy, and frankly, the more interesting dimension for me is who they invest in. Because what these platforms like Robinhood and Wealthfront, etc., young people are becoming micro investors, and they’re paying attention to who they’re investing in. And so now all of a sudden they’re your employees and your customers and your investors, and they’re pushing pretty hard for products that are environmentally and socially responsible, that come from companies that are environmentally and socially responsible.

19:05 – 19:42
Chris Thornton

Yeah, it’s not going to change and it’s only going to strengthen and it’s resonating so strongly because we’re experiencing that in my house. The same exact thing as we start doing some micro investing with our kids and the choices that they’re making and they often are far more informed than I am on some of these issues. So, it’s an anecdote but yes, what you’re saying resonates. Let’s go to purpose then. So, when you think about all the things that we’ve talked about, and how purpose is interwoven, why does purpose matter so much?

19:42 – 21:27
Sandy Skees

It’s an orienting principle, it’s an orienting expression, go back to that definition – what is the greater good that you as a business, want to create in the world. I’ll give you an example – I was in consulting with a computer manufacturer and they were trying to sort out what would be their North Star, what would be their purpose. One of the things we explored with them was they were talking about the digital divide and we need to make computing accessible to everybody and I said that’s a great way of defining access, but what if you expanded your sense of access to include people with a wide range of physical disabilities. What if you designed products that you became the brand that if I have a physical disability and I need a specialty computing product, I know to go to you. And then all of a sudden everybody on the call got very excited and they were talking about we can do this, and we can do that. When you get purpose right, it should unlock creativity and innovation and inspiration, and as my colleague likes to say when you know who you are, you know what to do. And if you have a North Star that’s inspirational, if your purpose is bigger than you, your company your industry segment, than business, all of a sudden it gives you permission to invent products, to go after certain market segments. It should be an enlivening concept that brings a brand some of its greatest ideas in addition to its greatest value.

21:27 – 22:00
Chris Thornton

We’ve got purpose and unlocking possibilities, unlocking potential about where we can go and then when we go through the strata, or the layering you described earlier in our conversation and get down to ESG and operationalizing it all so that we deliver on our purpose, where do you see the biggest challenges between shaping those commitments for the company and the people who have to deliver on those commitments.

22:00 – 23:55
Sandy Skees

Like all businesses, business challenges – they are so multi-layered, interconnected, and inter-dependent that that can feel dauting and overwhelming. So, if you’ve made a commitment to restoring the quality of water on the planet (let’s say that’s your commitment, you’re a beverage company). When you get right down to it, operationalizing that, choosing where and how you source water or return cleaner water to the aquafer that you took out – those become operational challenges and financial commitments that have costs associated with that and we’re trained as business people to optimize for cost reduction and optimize for time efficiencies – we need it fast, we need it cheap, and we need it wonderful, good, amazing. Already that’s a hard set of interdependencies that to try to navigate and if you try to throw in ‘and by the way we need restore environmental thriving’ or ‘we need to make sure that we’re including people in the mix that we haven’t’ – it’s going to take us a while to go get them and access them because we don’t have systems that make that easy. I was just on a call this morning, we were talking about setting expectations internally. It may take us longer, it may take us a little more money. Diverse hiring is a great example. In order to make sure that you’ve got the best set of diverse candidates to consider for a position, means it may take you longer to field all the candidates. We all have to be okay with it taking a little while.

23:55 – 24:51
Chris Thornton

And I’m working with a client right now where we’re thinking through how do we prioritize what we can do, because we still do have to deliver. The company still (I shouldn’t say we), the company still needs to deliver on targets across the board and incredible ESG commitments – significant ESG commitments, and where they’re figuring out right now is what are we going to prioritize. What can we do first, when we look across brands what goes first, where can we have a bigger impact in one area because it’s just a natural fit, and with some of the other brands it’s not as close of a fit. So, how do we prioritize certain brands so that they can lead the organization forward. This is really hard stuff Sandy.

24:51 – 26:40
Sandy Skees

Absolutely it’s hard. And think about it, the analogy I like to use – so what if you decide you want to live a more sustainable lifestyle. You go home and you look at your house – what do your windows look like? What kind of heat system do you have? Where do you buy your food? Who do you buy it from? Think of the complexity within your own household and your own family. Now, imagine you’re a $5B company making a thousand product SKUs using manufacturing facilities that some you own, some you contract. Your supply chain is three or four layers thick because you buy from suppliers, who buy from suppliers, who purchase ingredients. Like whoa, that’s a lot. It’s hard. I guess for me, simplification, focus. I don’t know if it’s just the times that we’re in and the years we’ve just been through, but for me, less is more. So, when you think about this client of yours, there’s some brands where you can make progress right away, where there’s some really good, easy alignments and you should double down on those. And then there’s a handful of portfolios that maybe aren’t going to be as easy. And for me, the question is do we need them? I think all corporations are going to come to that fork in the road – do we need six flavors of this BBQ sauce or just two? Simplification, streamlining, focus, reduced complexity allows for greater impacts. Perhaps.

26:40 – 28:00
Chris Thornton

Perhaps, yeah. That’s an option where we’re deepening choice and options has been where we had to go because as the pandemic hit, companies started to say we can’t do it all, and we’re going to have to choose. There may be a connection there for the future. You know, Sandy, I’m thinking back to when I started my career and it was the mission, vision, values conversation. ‘Do you have a mission, do you have a vision,’ It wasn’t purpose yet, it was just focusing on mission and vision. And then everybody got caught up (sorry I’m reminiscing), everybody got caught up on what’s the difference between a mission, what’s the difference between a vision, and do you need both and how does that fit in. And I feel like, in a very tangible way, we’re going back there to say ‘why are we?’, ‘for what reason are we?’, and who do we need to be next. How do you think about where we’re going in business, and where companies are going about revaluating purpose, mission, all of that. Do you have any insight for us?

28:00 – 29:51
Sandy Skees

Yeah, and in my book I dedicate a whole chapter to this exact conversation, because I do think it’s confusing. It doesn’t have to be. Mission to me, is the business of the business. The way in which we’re going to deliver on the business. The vision is from a strategy perspective – where are we headed. Values are pretty straightforward – how will we show up. But the purpose is bringing in the widest cast of stakeholders to say how are we going to be of service to a wider set of stakeholders that goes beyond our mutual self-interest. So you could argue that if a company has a well stated purpose it doesn’t need a mission statement – maybe, maybe not. But if your goal is to create more financial access for everyone in the world, your mission might be we’re going to build the most easy to use financial banking system there is – that’s a mission, that’s a way to achieve. The vision is over the next 10 years we’re going to do it in this way and we’re going to bring humility, respect, etc., as our values. So you can see how that all works together. Most business missions don’t create space for the greater good you want to be responsible for – that’s why purpose has emerged as a term that people need because companies want a vision that goes beyond their own self-interest as a business. Or the interest of their customers.

29:51 – 30:32
Chris Thornton

That makes sense. And where we are right now and all that we’ve been through (you know in Daggerwing we say if you haven’t revisited your EVP – employee value proposition – why an employee would want to work for you or stay with you. If you haven’t revisited it in the pandemic, your company has significantly changed and you’re not giving credit, or some things have been let go of and we’re not doing it anymore.) And I’m wondering if we’re at the same place with mission and purpose at this point. Are we at the same place where organizations need to revisit?

30:32 – 32:29
Sandy Skees

I think we are. I’ll go back to how did purpose emerge as a business term and there’s 2019 Larry Fake letter (CEO of BlackRock which is the largest investment house) and annually he sends letters to the CEOs of companies whose stock they hold and he said if a company doesn’t have a purpose more than profit, we don’t see that company as being viable for the future. His position is ‘continue to evolve and refine over time’ but that was when we began hearing the Milton Freeman ‘the purpose of a business is to deliver shareholder value’, that the Milton Freeman view of the business is dead. And that’s still a dialogue reasonable people are interested in having (I believe that it’s right). A business that optimizes everything to deliver shareholder profit cannot survive in the future, because too many stakeholders – we just talked about Gen Z – expect more. And if you’re optimizing environmental cost against delivering shareholder profit and you’re exploiting resources or polluting shared resources like air and water, your shareholders are going to reject you eventually. So that’s why we have companies exploring purpose. We’re going back to the original days when companies which were mostly privately held saw themselves as community builders – that’s what corporate citizenship was all about. How can I be a good citizen in the community where I’m doing business, so I’ll have a steady stream of customers and employees.

32:29 – 32:34
Chris Thornton

Sandy Skees, Global Leader of Purpose & Impact at Porter Novelli, thank you so much for joining us.

32:34 – 32:35
Sandy Skees

It’s been a pleasure.

32:35 – 32:36
Chris Thornton

I love getting to talk to you. Thank you.

32:36 – 32:40
Sandy Skees

Same. Thanks Chris, really appreciate it. Enjoyed speaking with you today.