The strategic value of ESG materiality assessments

In a recent webinar, members of the Goby team discussed how, with investors inquiring more and more frequently about what your company is doing in regard to responsible investment, how you treat employees and vendors, your dedication to sustainability initiatives, and other activities that fall under the ESG umbrella, it’s important to have answers to these questions. They covered what an ESG materiality assessment is, how it benefits your organization, and the assessment framework supports sustainable investment strategies. You can read the transcript of the webinar below or click here to view the recording.

Michelle Winters: Hi, everyone. Thank you for joining our webinar today. We’re going to get started in just another minute, give a few others a chance to join here, but thank you for joining us today. All right. Well, we are just now getting started here. For those that are joining, we’re going to give it just another thirty seconds or so and then we’ll get kicked off. All right. Okay. Everyone, thank you so much for joining our webinar for today. Welcome! This is “The Strategic Value of ESG Materiality Assessments” and it’s a webinar hosted by Goby. My name is Michelle Winters. I’m the VP of Solutions at Goby and the moderator for today’s webinar.

So as we all know, investors are inquiring more and more frequently about what organizations are doing in regards to responsible investments, how you treat your employees and vendors, your dedication to sustainability initiatives and other activities that are falling under that ESG umbrella. It’s important to have answers to those questions and it’s a big world. A materiality assessment empowers you to easily report on your current state and outline what future initiatives will focus on while taking into consideration your business goals and risks.

In our webinar, we’re going to be discussing what an ESG materiality assessment is, what the benefits are for your organization, how the assessment supports sustainable investment strategies. So our team of experts will provide tips and best practices for the creation and implementation of what a successful ESG materiality assessment can look like. So today’s session is going to run about 50 minutes in length and then we’re going to leave time for questions at the end. The webinar will be recorded and sent to all participants, but before we begin, I'd like to go ahead and introduce our team here.

So speaking for us today, Kylie Ford is going to be kicking us off. She’s our Goby ESG Consultant. She has over a decade of ESG management consulting program experience. She’s an expert at bridging multiple roles and has worked with organizations of all sizes across all different sectors. And she has really focused a lot on employee engagement, strategic business development and process improvements. And then, we also have Mari Bishop. She’s one of our ESG Managers here at Goby. We like to call her our change maker. She has a rich background of program management, research, problem-solving skills and leadership, of course. And she really enjoys bringing that extensive knowledge of broad range of skills to connect the environment to that responsible, healthy, and profitable development.

So the last thing I’ll mention is feel free to submit questions at any time throughout the webinar. You should be able to do so in the bottom right-hand corner. I'll be collecting those and at the very end, we’ll be sure to get through as many of those as we can. But with that being said, Kylie, the stage is yours.

Kylie Ford: All right. Thank you, Michelle. So as Michelle had sort of teased, the first thing we’re going to be discussing is what is a materiality assessment? Likely if you’re here, you’re listening, it has come up for you in some way. Maybe an investor has asked you to complete one, maybe a peer of yours was bragging about having just done one or maybe you’re in the midst of submitting a GRESB questionnaire and you want to see if you could get those extra points for next year, what would a materiality assessment look like?

So simply put, a materiality assessment is a tool. It’s used to both identify and prioritize ESG or environmental, social and governance issues that are the most critical to your organization. And really you can think of this more as an exercise in stakeholder engagement as well too. It’s designed to find the relative importance of those specific ESG or sustainability topics. So really what it means is that you look at a variety of sustainability topics, ESG topics, whatever they might be, and you think about it from two lenses.

The first is the potential impact to your organization. So as an example, indoor plants are a sustainability topic or potential project that you might think about undertaking. What’s the potential impact to your organization? Likely, it’s not going to be a ten on a scale of one to ten in terms of what could the change be. However, if it’s something like a new regulation coming down or a new disclosure that you’re going to be required to participate in, that could be hugely impactful. So it’s just taking a variety of these topics and ranking them by relative importance.

The second angle that you’d be looking at everything is the importance to each stakeholder. Just to pick on the indoor plants example again because it’s easy to conceptualize. Maybe you don’t think it’s that impactful, but if employees really, really care about indoor plants, that could be a quick win for you to consider looking at. And by looking at these, oh I should also back up and say potential impacts can be both positive and negative. So if you’re looking at a particular sustainability topic, it’s not just oh this is a risk that’s floating out here in the future or we need to act on this or else our employees will be sad at our lack of office greenery. It could also be an opportunity. Maybe new talent would be attracted to some of these items that you’d be undertaking. So that’s really what we mean when we say impact.

And then understanding the importance to each stakeholder is really the key aspect of materiality assessments. And that’s also why it’s important to have a broad range of stakeholders. So when we talk about stakeholders to your organization, the identification of them is just as critical as anything else. You might immediately be thinking okay employees, board members, investors, possibly suppliers and distributors as the stakeholders that you normally would engage with, but it can be broader than that too. It could be local community members or even broader community members. Maybe an NGO or another advocacy group, industry trade groups, things like that. And the more interviews you conduct with these stakeholders and the broader a spectrum of opinion you get on it, the more you can help position exactly how your company is doing both from the perception of the stakeholders involved and where you could angle towards for your ESG actions in the future.

So why do you need a materiality assessment? Well, I’m already talking it up so let’s dig into a little bit of what those specifics are. For one, it’s really a guide for all of your ESG or sustainability strategy and communication. You could even think of it as a blueprint. It really tells you here are the items that we need to be focused on. And why is that? Well, because it makes the business case inherently for the projects that you might be undertaking. Again, to the indoor plants, maybe you just don’t care about it that much. But if you see employees really, really like it and you present that to upper management, they’re probably going to want to act on something more than another item that maybe employees could be more tepid about. So that’s just one item of it and especially it can help make the business case for more costly endeavors.

Maybe you want to get your headquarters LEED certified, for instance. Well, if that’s something that potential investors would be attracted to, if that’s something that would have a positive effect on the local and community and if that would help the comfort of your employees and attract new talent, then that makes an easy case even though there is a cost associated with that project. So you can leverage the results of your materiality assessment to help achieve support for whatever that ESG program might be.

Next, it informs communication strategies. Maybe you find out that board members really care about one item, but employees care about another and the public cares about a third thing. Well, your internal and external communication can be tailored specifically to the needs of these groups. At your next board presentation, you can lead with the ESG items or initiatives that you think are going to capture their attention the most. The same goes for company newsletters. Really get people engaged with your program by showing that you care what they care about too. So just that sort of inherent ability to enhance your marketing strategy surrounding all ESG efforts is one of the biggest benefits of a materiality assessment.

Getting ahead of long-term risks. Those of us in the sustainability world are very familiar with the quadrant of is something important versus urgent or not important, not urgent, right? And when we talk about this in general to sort our work, we try and focus on important and urgent. And we know that a lot of sustainability topics are important, but not immediately urgent. Think things like climate change adaptivity or a new regulatory risk. Maybe there could be a regulatory change, but that’s not going to come tomorrow, it’s going to come down the road. So how do you prepare for those things that are very, very materially important, but not present at the moment? And that’s exactly what a materiality assessment will help you do because by ranking the impact, the potential impact to your business, it just automatically elevates and kind of lets it rise to the surface that this is something that you should be focused on. And you’ll also know exactly what it is that your stakeholders are caring about with regards to those longer-term issues. So it helps you to be more strategic in your general ESG approach rather than tactical as things are coming at you.

The next is that by doing this, by looking at these long-term risks, you’re identifying ESG trends. You’re seeing the direction that things are going. Something that an investor cares about today in 2020 is very different than what investors were asking about in 2010 when ESG was sort of this new hot button issue and you’ll get to see that. And the more interviews you do, the more stakeholders you bring into your materiality assessment, the broader a picture it paints of what those ESG trends are.

Finally, and perhaps most obviously, but still definitely worth a focus is that you are able to meet ESG reporting expectations of your stakeholders; any kind of disclosures that they want to see. Sometimes, it takes these conversations to know oh we actually should be publishing our energy footprint every year because that’s something our board does care about, that’s something our investors do care about. Or maybe it could even encourage you to participate in a reporting or disclosure mechanism for the first time you hadn’t considered. Something like doing a GRESB assessment which has become more of a concern for some groups of stakeholders. So just going through this process, being able to align yourself with what the expectations are and bridge that gap will help you craft a truly strategic ESG strategy.

So let’s talk just a little bit more about the current ESG trends in materiality and just the trends in general. Because those of us in ESG, we know it’s a shifting area, there seems to be a different focal point. I don’t know. Almost every five years, something becomes really hot. And in general, 2020 is a year unlike any other that we’ve ever seen. So it might seem like things have been thrown out, the playbooks are being completely rewritten, but the good news is that those of us staying along with ESG trends, participating in more strategic projects like materiality assessments, this actually comes hand in hand with what’s going on right now. And what do I mean by that? Well, employee and community health in particular along with business continuity plans and overall resilience of businesses have become a hot-button issue. And we’ve seen this develop in the last two years, but especially now. Especially where we are, it continues to be the trend that we’re seeing over and over again.

You can even look at this on an asset level. There are more and more Fitwel certifications and WELL certifications. Not just at Goby, overseas, but in general in this current environment that buildings are pursuing. And for anyone who doesn’t know what Fitwel and WELL are, these are building health certifications; things that look at asset levels on a basis of how healthy it is for the tenants. What’s your proximity to local transportation? Are there healthy options in the vending machines? Items that maybe in 2010, if you had said hey, this is a really important sustainability topic, no one would’ve paid attention to you. However, now it’s becoming a chief concern because you’re looking at your ESG impacts and really looking at how to elevate things in that S sector which has for a few years felt a little bit underdeveloped for some.

You’re also seeing more of a focus on these overarching strategic plans that tie into business continuity plans. Climate action plans. You’ve probably heard TCFD Reporting come up which is the taskforce on climate-related financial disclosures. It means that there’s more of a focal point on these longer-term risks that are coming down. None of us ever thought we were going to have to create business continuity plans surrounding a pandemic until we had to create business continuity plans surrounding a pandemic. The same is true for if and when there are effects of climate change that could disrupt our business whether it’s more extreme weather patterns or even needing to move office locations entirely. So it’s something to stay ahead of and something that materiality assessments can help pinpoint for you.

Finally, we’re seeing this rise in more just financial focus of your ESG work, I should say. Things like responsible investments, accounting standards such as SASB have also become more and more in the conversation. Maybe UNPRI signatories, that’s something that more and more organizations are looking at and this goes hand in hand with climate readiness. Truly making sure that your actions as an organization are sustainable all the way through, not just on the resource management side of things. Making sure your waste is looking good, making sure your energy is going down, but on your investments. Materiality assessments are now inclusive of these topics and they can help orient your organization within how important they are to your stakeholders and the need for any potential action. So to talk about how they would be able to leverage that stakeholder interest with investors, I'll turn it over to Mari.

Mari Bishop: Thanks, Kylie. So you heard about what it is, you heard about why it might matter to go about going down this path of a materiality assessment. Perhaps your investors have been asking for it by name, but most likely they’ve been asking for it in some other ways. So I just wanted to go over a few of the things that we’ve seen investors asking for from our clients and kind of what we see the investors from within the market asking for.

So I’ll divide it into kind of three categories. The first one being framework alignment. So this takes the shape of science base, global, finance, investment-focus framework and alignment. So Kylie talked about a couple of those, but they can be different depending on who the entity is, who the organization is, what your goals are and your overall structure. So it can be science-based targets, priority agreement goals which tend to be a little more global. You want sustainable development goals or STGs which you probably have heard about or other more global frameworks like GRI reporting, PRI, TCFD, SASB, CDP, a lot of requirements. And ideally, you want to make sure that through doing materiality assessment that you are taking time to see what’s out there, making sure that there is an alignment with what you are trying to achieve, what works best for your organization because investors are asking for it, because it’s best for you down the path. And also make sure that a lot of these can complement each other, a lot of them might be a little bit of overlapping so make sure that you choose the right ones when you’re going down the path of framework alignment.

The second one being stakeholder engagement. So the second category is in a way a continuation of the first one with that initial step of figuring out what frameworks you want to align to first and then adding that additional step of disclosure and engagement of different stakeholder groups. So depending on the organization and depending on what you’re trying to align to, you might want to engage, at different levels, your employee base, your customers and even taking it a little step further for the supply chain or the community. The investors right now are asking for transparency and engagement when doing this step. So increased reporting and disclosure, definitely a big one, and focus on more transparent best governance standards. So the idea of aligning to all these things that are kind of standard, but also taking it a step further because you want to make sure that you stay ahead of the market trends and also being transparent about it. So putting it on the website or even making sure that you remain very engaged with your investors and you are keeping them in the loop of how it’s going, what you’re going after and how far you are from achieving them.

Employee health and wellbeing, definitely a big one that is coming across from all industries as we get more into this. Especially now that we’re all kind of doing this work from home and possibly hybrid, what is that going to look like. Being always on because you have the internet. Anywhere you are, you’re working. Making sure that there’s that work-life balance and that you keep the employees engaged, that you keep one of your most valuable assets in the company. Definitely, very important. And lastly, like I mentioned, engaging supply chains, contractors, communities, those kind of third level engagements which will look very different depending on what you’re trying to achieve. But definitely a very important point if you’re trying to be resilient and you are trying to stay ahead of risks in general.

And lastly, the third category is kind of contained within the two others, but this one is just talking about the data, the metrics, the plan and the structure that build on sustainable busines strategies. But like every other sound approach, data analysis and tracking need to back up strategic growth. So making sure that you have those metrics very well defined, that you have a system in place to keep track of them and have also a process to make sure that you can adapt, be flexible and shift gears depending on changes that happen throughout. And so that you stay relevant with market changes as well, of course.

And here, we’re seeing performance tracking being a big component of it. So that can be ESG, environmental, social and governance for performance tracking. It can look at quantitative and qualitative aspects. We’re also looking at efficiency performance of assets so the more technical basis. Big point here is looking at assessments that kind of look at that asset level engagement and realizing that there’s no one size fits all.

Risk-based business strategy. So, again, going back to making sure that you are prepared for risks, that you recognize what those can be and that there is a very strong focus to be risk-prepared for everything that your business is planning on doing short-term and long-term.

And lastly, greenhouse gas emissions reduction. This is definitely gaining more momentum as we go. I think it’s also, very easily we’re finding that it can be very easily coupled right now with a big aspect that’s coming up from this whole pandemic which is indoor air quality or just air quality in general. Attaching that to your carbon emissions strategy can definitely be a good opportunity to tackle two birds, one stone. Definitely something that investors are asking for especially if your organization is more global. We have kind of different places. The European Union, for example, has very increasingly more strict mandates around that GHG emissions planning. And okay, there we go. Okay.

So next, I wanted to cover who needs to be involved and when. I think this is a pretty common question that we get any time an organization, a client approaches us. They want to learn more about I want to do this, I want to strategize, how it’s going to look like, how to go about it, but first who do I need to loop in and when. How is this engagement going to look like? They want to make sure that they have a good approach to be able to set expectations from within their teams.

So number one, we want to make sure as very first step from the stakeholder engagement portion that you identify your goals. That step involves corporate leadership, it involves ESG leadership. It can look a little different depending on how your organization looks like. Sometimes it can be the corporate members, it can be more into the entity or the fund level or a mix of both. So corporate operation, senior team members, members of an ESG or sustainability task force or group if there is one. Or it’s about to be formed, if you know who those people are probably going to be. Members of corporate ownership from the ESG team, members of corporate ownership senior team members. So it’s a mix of, this would be kind of the main decision makers, the ones that you want to make sure you engage so everything else that you do moving forward is aligned with where you want to end up. Once the goals have been identified, key stakeholder groups can be ascertained as well as depending on the nature of the goals and the organization’s governance structure, we’ll be expanding the group that we are engaging. So we’ll introduce to key stakeholder groups and draft topics.

So here’s when you already know what you want to achieve, now you want to make sure that you understand the baseline. You want to understand what everybody is kind of looking for or what they think is material, what they think is the most important, it needs to be prioritized or even where these different groups think the organization is at. Most of the time, you’ll realize that they’re not one and the same which is why you do this exercise. You want to make sure that you gather all of these different points of information. And for this group, you’ll be looking at engaging regional, operational, planning leadership. So for real estate, this can be portfolio managers or directors, asset group managers or directors and engineering directors. You’ll also be looking to engage departmental leadership such as employees of HR or community partnerships, leadership. Anything that’s customer centric as well to make sure that you understand from those leaders, from those points of view, what is material from their point of view. And lastly, business development or acquisition team leaders which is of course very important in the form of where the business is growing into or what the business is continuously acquiring for or the strategies or the processes that go into acquisition and growth. You want to make sure that you involve those groups as well at this stage.

And lastly, you introduce a draft of the general goals and align it with the rest of the organization. At this point is where you kind of get a little broader, a little boots on the ground; the people that are really going to be taking this concept and implementing it making it a reality. The people that moving forward after the materiality assessment are going to be tracking the different steps towards the final goal. So this can include management and analytic teams so anybody from within the asset management team. Sometimes if you have, let’s say an ESG analyst or you have financial analysts or other people that would be really important, to kind of make sure that they are on the same page and they understand what the role of the exercise is. They can give their input into what they’re seeing as well. And also, organizational partners especially if one of your goals and some of your important goals that you have identified through the exercise have to do with engaging that kind of third level of community supply chains so on and so forth. You want to make sure that you engage some of those key organizational partners as well.

So now that we’ve talked about who needs to be involved and when, I just wanted to quickly show you how a use case would look like. So this is a sample of the summary, the graphic summary of what the ultimate result would look like. So in here, it doesn’t have to look exactly like this. Of course, you know you want to make sure that you make it work for what you need, but usually has to do with an X and a Y axis is looking at how important it is to stakeholders versus how much it impacts the company’s success or the company’s ultimate goals. Through the exercise, you identify all of these different opportunities, goals or just subjects that are material to the business. You put them along in this chart. Of course, you know the rest of the report really breaks it down into what it means, how it’s going to look like, how you’re going to track it, who’s involved and all of that.

So to get into a little more specific, we prepared a couple of use cases; exciting stuff. Calling it Company A and Company B. So for Company A, we have Company A approaching us. Their whole idea around materiality is they think they already do some ESG already, but they feel like it’s all over the place. They aren’t sure what their baseline is, what they have, what they’re actually doing, if it counts and they don’t know where to go from there. So this was quite common. It usually happens when you have already been engaging and have already been doing some things towards ESG strategy, but you don’t have an actual system in place. So you want to kind of start having a system in place and really creating this timeline how to get there. So materiality definitely can help you get there.

Step one. We would be assessing existing policies, strategy initiatives so, of course, we want to know where Company A is at. We don’t want to duplicate efforts, we don’t want to reinvent the wheel, we don’t want to overwrite things that might already be working quite well, but we also want to know what is there that we can just take and run with, grow it or what’s just not there and we need to start from scratch per se. So this can look like looking at existing policies, looking at existing initiatives or plans for upcoming policies and initiatives.

Then we’ll move into identifying and engaging those key stakeholders so that kind of step that we just went through before. At that point, we should be able to understand the current and needed growth in ESG topics, meaning we know where we’re at, we know what we have. Now we know what’s important for our stakeholders, we’ve gathered up those different points of views, where are we then exactly metrics-wise and what do we need? Where’s the gap between what’s already there and what people are saying is material will aggregate these insights. So this is where you start really prepping that report that really outlines all of the different findings that you’ve encountered so far and start identifying next steps. And you make sure you compare it against existing strategies.

So I mentioned that at the very beginning. Perhaps it’s not something that’s fully, completely in place and documented, but it’s something that you were already planning on doing within the year or something like that. Your CEO just released a letter committing to something specific that has to do with ESG strategy. You want to make sure that everything that you just got out of the door or you’re planning on getting out of the door, does not collide with what you have found so far as you aggregate the insights.

Then the next step would be to identify opportunities and plan implementation of those opportunities. So now you know what’s there, you know what is needed to get to where you want to be and you make sure that it aligns with anything else that is part of your succeeding strategy. Then next step is okay so these are the exact steps that these teams along this timeline should be implementing moving forward.

Once we know what those action items are, very important, you should be selecting a system to track performance. So how are we going to track how far we are to the goal? And that can be in a quantitative and qualitative metrics and also kind of setting up a system, like I mentioned before, to make sure that you remain flexible and then you can quickly shift gears as needed. We’ll set goals and the timeline for implementation. Make sure that you convey that to all the teams that will be part of the implementation moving forward. Do they agree? And then launch!

For Company B, Company B approaches us and says, “Our company doesn’t know much about ESG nor have we purposely been growing around it. However, we have received sudden, immediate demand to jump on board with it from our investors.” Well, first of all, this is something that I always like to say whenever a client approaches us saying, “We’ve done nothing for ESG. We have nothing going on for that.” Chances are, you do. There has got to be something. We will find it and we’ll make sure we go from there.

So step one. Indeed, finding what you do have in place. Perhaps, it doesn’t have ESG on the title, but it most definitely can be tied one way or another. Let's see what’s there, let’s see what it could look like if we grow it from there or do we want to just scratch that off and do something else that gets us on the right foot for starters.

We’ll identify and engage the key stakeholders, again, just like before. But this time around, we might want to also make sure that we are doing a bit of an ESG 101. Chances are, if the client thinks they haven’t really been doing anything ESG-related, the rest of their team is also not very attuned with the concept. So before we start reaching out to all of these stakeholders and asking them questions and throwing different definitions and concepts at them, we want to make sure that everybody is on the same page. They understand why their company is going after this idea, why it matters for what they do on an everyday basis and for the future of the business. That can be coupled with that identification and reaching out to stakeholders.

We’ll then move to the next step to understand the current needs around ESG topics. So by then, you should have mostly everybody kind of on the same page and understanding what they have identified as material. So you can start identifying then what the next steps are and what needs to be done. We’ll aggregate those insights, compare it against the existing strategy to make sure that there are no overlaps or conflicts, identifying opportunities, planning and implementation. But in this case, because, again, because Company B has not been purposely per se pursuing ESG growth, we also want to make sure that we take some time to create a strong baseline. So depending on the organization at this point, we might want to first take a step back and make sure we gather enough data, enough information, pilot some programs or initiatives before we jump into okay this is how the next five years is going to look like and this is how we’re going to implement all that.

Otherwise, the rest of the steps are pretty similar to Company A. Ultimately, depending on the timeline and the aggressiveness of how fast do you want to get to this ultimate ESG you know this is how I want my company to do ESG in five years, ten years, three years. Like I mentioned, we might want to first focus on a strong baseline before we get too aggressive and try to get all the way to the end. Okay. And if anybody has any questions, this is the time.

Michelle: Thank you both Mari and Kylie. So I’ve been getting a couple of questions here as you guys have both been speaking. And I think this is, if nothing else, we want to make sure this is informative and to share back with everyone that’s attending. And we’re hoping to get through as many questions as we can and then can always follow up directly with you as well. Our contact information is here below. We give it freely. Please reach out to us. We would love to talk to everyone directly, but for the larger group that is also on the call.

So one of the things that kind of called out to me as a couple of questions that we were getting is associated with more times financial performance. So we frequently see that a lot of decisions come down to the financial performance, the dollar value, so to speak. We think that it’s incorporated into a lot of components, but could Kylie, maybe I'll toss this one to you first. Can you talk a little bit more to the alignment that we’re seeing between financial performance and these ESG initiatives? And even specifically if I can combine a couple of questions here together. Is there certain evidence that we’ve seen that’s leading to this increasing revenue potentially or even specifics that you’ve seen that have had the highest impact associated with that financial performance?

Kylie: Sure, yeah. This comes up I'd say almost with every single client that I’ve ever worked with. Simply because you always want to make sure that you are getting that dollar investment when you’re taking on these bigger projects and when you’re taking on ESG in general. It's an investment in personnel and in maybe third-party consultants, whomever you might be bringing in for something like this. So you know, yes. The simple answer is yes. We do see an alignment with engagement with ESG and positive financial performance. It used to be a lot easier to sort of visualize because a lot of the focal point had been on reducing your environmental footprint. Things like being more energy efficient, using less water, increasing your recycling streams which can actually make you money.

So when we looked at material, you know efficiency, that’s kind of the obvious you know you get a return on investment and we could even calculate out for you. If you replace this HVAC system, then in eight years, this is exactly when it will become profitable, things of that nature. When we’re talking about really all the topics that materiality can encompass and it could be everything, it could even be risks that never come to fruition just depending on how those risks are ranked, that's when things get more amorphous. It's not to say that we’re not seeing a payoff, but it’s just more difficult to capture in terms of here is your break-even point.

I think the biggest evidence we’ve seen, God, there was like a 2015 Harvard study on this that showed that it leads to more engagement with stakeholders and that there’s a reputational increase for a company and that’s a big one too. It truly depends on the nature of the company’s environment, what the market is. Things that direct consumers might look for, for instance, are going to be more stringent even than maybe other businesses that are relying more on responsible investments and things more of that. So you’ll see like Fairtrade stamps on ice-cream. And that has a direct correlation with more consumers being willing to buy it, being willing to champion whatever ice-cream brand this may be. I'm just thinking of Ben and Jerry’s because that's one of my favorite B-Corp sustainable corporations to always use it as an example. But in general, focusing on ESG and just having that framework, it allows you to sort of have that higher level of operational management. And I don’t just mean in the sense of resource management but looking at all aspects of your operations and that’s what we’re talking about with getting ahead of those ESG trends and spotting those long-term risks.

So maybe I won’t be able to promise you a payback period, but I do promise you that having this focus on the things that are going to be coming down the road is important to you and especially for anyone with investors. Investors need to know that they’re putting money into people that have foresight in mind. And this is really where ESG can tap into it in addition to the reputation of a company increasing with the more sustainable efforts that they have.

Michelle: Yeah, absolutely. And I can even add to that slightly in the sense that I think there are two components. There's a little bit of that, exactly what you said. The financial return of by doing these things, I'm going to save costs on my energy consumption, water consumption, I think that’s pretty well baked and you could have a nice ROI on it. But more so, when you’re looking at larger ESG strategies, they’re not always a tangible ROI, but there are a lot of studies out there related to increased financial performance that align with ESG initiatives to exactly what Kylie was indicating. And investors are seeing this and investors want to put more money into those ESG funds for all of those reasons that Kylie was indicating. So it’s a little bit maybe less ROI-specific, but definitely high in impact for overall financial performance.

Kylie: Yeah. And just to add slightly to that too, a lot of the examples that we gave within this for what sort of topics you might be focused on for materiality are in the social realm and keeping your employees happy. Employee retention, that’s a huge cost-saver because we know that it costs so much more to train up a new employee if you have higher turnover. So that’s just one little element where I think I could point to and say yes, there’s your ROI. But in general, it is the more strategic viewpoint for your organization.

Michelle: So we’re going to all buy plants and keep our employees happy. Got it.

Kylie: Have you gotten the message that I want indoor plants when we go back?

Michelle: No, that’s perfect. Okay. So another kind of specific question. Mari, I’m going to toss this one over to you. As you were talking about stakeholders, specifically one question was just how do you recommend even selecting the stakeholders to reach out to you? And what have you found to work well to increase participation and maximize that kind of meaningful input?

Mari: Sure. So I think those three steps that I mentioned you know that very first one, finding those key decision-makers. Usually, one or more of those aren’t the ones who actually brought, that wrote up the request of let’s look into a materiality assessment. So usually, it tends to be a lot easier to engage people at that level. Once you get to level two and three, it really depends. Ideally, everyone will be very excited to participate and you can easily get everybody on the phone and you know we can all talk about this, but chances are there might be some people who just don’t see the value as much as you might be seeing it. And in those cases, really very important to make sure that you and something that we definitely do when we are stepping into that level, make sure that you are changing and adapting your communication piece when you first reach out or when you’re telling them about the exercise. So to make sure that it matches what their interests are so kind of speak their language. Very different if I approach the Director of Engineering for the North America assets for Company A, it’s going to look very different than if I approach the HR Director. Of course, you know they’ll kind of be different backgrounds and different things, issues that they’re dealing with every day on an everyday basis of different things that are being requested that they’re being asked for by leadership. So just making sure that you understand what leadership is asking from them and making sure that you’re asked for that initial reach out is speaking from that point.

So that way you’re telling them, “Hey, I know that you’ve got to do this thing or that you’re having challenges getting this or that done. Here’s how this is going to help you.” And it doesn’t have to be let me give you the whole spiel of everything is to either is you know what I need from you is this Mister or Miss Director of Engineering is the technical aspect. I want to know what the struggles are to run your assets at the top of the performance and kind of tell them you know talk about what you can get out of it because I know you’re being asked for Y and Z by the end of the year or something like that.

And to make sure that you get the most out of those communications that definitely I think something that has worked really well is make sure that they know ahead of time exactly what you’re going to ask that you give them enough background information. So when you start having that conversation, you don’t have to use half of the time bringing them up to speed and making sure that you’re both talking about the same thing. So that would change depending on Company A or Company B, right? For that Company B, that would take the shape of an ESG 101. And then after that, making sure that they have something that they can allude to as you’re talking to them. But perhaps for Company A, that’s simply okay here’s a very thorough overview of what we’re going to be talking about. Don’t stray away from that informational piece, making sure that both of you are always on the same page as you’re talking.

Michelle: Yeah, absolutely. And it’s interesting too. I think this falls in line too. There was a specific question that was associated with that I think goes hand in hand with when you’re beginning this materiality assessment and kind of almost the questionnaire and deciding what stakeholders to get involved and how you get responses back and what you do with those responses. So I thought this was really interesting is that it specifically says one thing that they’ve noticed is the employees are ranking specific issues high that they’re maybe already addressing and how do we kind of take some of that bias out of our overall result of that materiality assessment. But I think this actually can be answered with almost what you’re talking about as part of this process is it is a communication, it is part of the different aspects is also providing knowledge of what you’re doing as an organization and how you can communicate back as well. I don’t know. I'm going to just keep going back and forth, but Kylie, is there anything that you would maybe add to that or expand upon on what Mari was saying or I was just saying?

Kylie: Yeah. No, I mean I think we kind of talked about how this can help with communication strategies in terms of you can tailor to what people are interested in. But another big asset of a materiality assessment in general is that it points to these blind spots of where there may have been gaps in communication. So it’s great that your employees care about things that you’re already working on. It means you’re pretty much there. You just need to be able to champion this more, make sure that that information is readily available on a forum where it’s heard as well too. So that’s just what I would add on it. It's not just communication in terms of what to communicate, but how and maybe evaluating current communication and where that can be improved.

Michelle: Absolutely.

Mari: You know also another question...

Michelle: Oh, go ahead Mari.

Mari: Just one last quick comment from there. If that particular stakeholder is identifying something as very material and it’s already in place doesn’t necessarily mean that there’s a gap in communication. It could also just mean you’re doing well. Continue to do so. It matters to people. Don’t drop that off your strategy moving forward. Keep it on.

Michelle: Yes. I like that as well. So question I get asked a lot that sometimes I almost feel is a struggle to define to a certain extent is what this deliverable looks like. I know we’ve talked about this and you gave a few examples, Mari, and I know we indicate that it can be slightly different for each company in terms of what story they’re trying to tell, but Mari, maybe if you can dive into that a little bit. Does this look like a report? A presentation? Maybe you can expand on that a little bit what we typically provide.

Mari: Sure. So it looks like both; both a report and a presentation. But before I get a little bit more into that, I would like to say one thing that you might want to do, but I believe it might not be the right way to go about it, is to try to standardize it to try to make it look like others that you’ve seen online or this peer that you know has also done it. I want to do it exactly like that because I want to easily just compare apples to apples. Ultimately, you do this because your organization needs it because you want to bring more value to the organization, the right value to your organization. So to that end, it needs to be customized and it will be what you need it to be. It will be a report. It will be a presentation.

I think just having this big document that no one really looks at, you know because you just kind of receive it and you don’t know how to read it. You don’t know where I should be steering my attention to especially as it might be different depending on who’s looking at it. So that’s why it’s important for us to make sure that there is a presentation component to make sure that we are highlighting and giving the key information to the key people as they need to receive it. And then the report just takes place as it’s for you to kind of reference as you move forward along the three, four, five, ten-year plan to implement all those goals.

Michelle: Awesome. Yeah. I think that helps even provide additional clarity there as well. So I think we have time for maybe one or two more questions and I thought this one was great as well that builds a little bit off of what we were saying, Kylie, is the tracking and quantifying of some of those environmental data metrics is really easy.

You can have a software where we track the energy, water, waste data, but what are some examples can you dive into on tracking and even quantifying some of those goals and targets and our social and governance?

Kylie: Yeah, it can be difficult and it’s really dependent on what sort of rides to the surface. Very easy quantifiable metrics are things, especially on the social side, you can track employee retention as a percentage, you can have goals set around you know we don’t want any more than 5% turnover, whatever it might be, from year to year. So that’s just a really quick one that comes to mind, but a lot of times it is hard to quantify what you’re trying to do. So it’s just really about strategic goal-setting in a way that’s meaningful to your stakeholders. So it’s not necessarily putting pressure on yourself that every single goal has to have a number behind it, but maybe you’re trying to say okay we have the goal, but in the next three years we will have a due diligence policy, an overarching ESG policy and some kind of newly updated corporate social standards, whatever it might be that you’re doing. And yes, you can count one, two, three, there are your policies so that’s kind of an easier way to get at it, but don’t feel the pressure to really conform these social and governance goals into something that’s so easily digestible.

A lot of it, it might even be higher participation in employee engagement surveys. Maybe you’re sending out surveys each year to see how happy your employee base is and you just want more participation in it. Maybe, you set a goal to have more feedback sessions with tenants or with community members, things like that. You can always put numbers behind it, but just increasing engagement, increasing your space out there, increasing the breadth of what your policies cover. That's usually a good first step to start at. So that’s how I would look at it. What's going to be meaningful to your stakeholders to your organization? Start with that and then make the goals, make the goals that work for you. And if there are numbers behind it, great, but it doesn’t always have to be you know 20% reductions by 2030 or whatnot.

Mari: I have a few things to add.

Michelle: Go ahead, Mari.

Mari: I think that at that point, answering those kinds of questions, that’s where the framework alignment comes in really helpful. So one of the very first steps is figuring out if in which frameworks you want to align to. And that becomes really, really helpful for you to know what metrics you’re trying to track when you’re going after and how you’re tracking them because there’s already this kind of blueprint that you know you want to fit in that makes it easy for you to benchmark against yourself moving forward and also to benchmark against your peers moving forward.

Michelle: Absolutely. Well, I know we only have a couple more minutes here. One of the things that I saw as well in the notes isn’t necessarily a question, but just like additional comments that I thought were really great to kind of add to our financial performance conversation that we were having a few minutes ago. But there's a lot of alignment now as well associated with executive compensation and it’s based on share value. I thought that was another good reminder. And that we’re also seeing a huge increase right now and showing companies with higher ESG ratings are showing more resilient stock values. And I think you know this is also mentioned especially during COVID.

So I know we’ve been talking you know Kylie you mentioned a little bit in the world we are in today and that if nothing else, it’s kind of presented that this is why there’s added value to ESGs. To think of a little bit of the unthinkable, having those business continuity plans in place, evaluating security measures, you know being able to take your company with a second’s notice of like okay, we’re all now working from home, but don’t come back. And what does that mean for our organization? And just managing those risk assessments. So I thought that was just another good thing to maybe realign or think about of the constant changes that I think we’ll see in ESG.

Yeah. I mean you know, Mari or Kylie, anything else that you want to end on or mention? Otherwise, there are a few questions we didn’t get to, but for all of those that asked them, I'll be happy to reach out to you directly as well, but yeah. Ladies, anything else on your end?

Kylie: Yeah. One thing I wanted to add is just don’t be intimidated by the stakeholder interviewing process and feel free to throw on people that you may think you know what maybe their perspective isn’t the most important to our business. You’ll be able to sort that all out when you get the results back and you’ll be able to know really what is meaningful and what’s not. But just having a large diversity of views is I think where that becomes the most impactful. It’s where the data becomes the most meaningful too. The more voices, the more that things would normalize around median distribution, for lack of a better term, but definitely don’t be intimidated by that. People want to be able to give you feedback and you’ll be surprised how many people are engaged with the process once you get the ball moving.

Michelle: Yeah, absolutely. Mari, anything else on your end? Parting thoughts?

Mari: Yeah, sure. I'll just add yes, the world that we live in now, there’s definitely I feel like when we say that, we follow it up with something sad or not necessarily good. But really, I, and I actively try to do this personally, there’s so much opportunity that is coming out of the world that we live at right now. I can use one example of one brand new client that we have is jumping on a materiality assessment and other opportunities because she has been trying for a long time to get everybody on board. Now, everybody is on board. It's like okay. Now, everything is happening now while I have your attention. So while all of our attentions are focused on this which also means our investors you know everybody’s invested, investors in general are asking for this a lot louder, a lot more often. This is the opportunity; this is the time.

Michelle: Yeah, absolutely. I couldn’t agree more and it’s what we’ve hopefully presented to you is one way to go about diving into that in a strategic way to help you figure out those next steps on how to really move that forward within your organization. So we really appreciate everyone’s time today. Thank you so much for joining. We’ll be looking to send this presentation to all the attendees. You have our contact information below and we look forward to having you join on the next one. Thanks everyone so much.

Chris Ogletree

In his role as Marketing Manager, Chris oversees website administration & development of a wide range of content, including email campaigns, social media, & marketing collateral, as well as supporting improvements to the design & functionality of the platform.

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