BLIVE: Bloomberg Sustainable Business Summit, The Art of Sustainability

BLIVE: Bloomberg Sustainable Business Summit, The Art of Sustainability

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KAYE V-J, thank you so much for being here for this conversation. We kind of want to take this a little bit of a different direction. Instead of focusing on the chief sustainability officer role. Talk about other departments that are kind of taking on these responsibilities a little bit more. I would like to just remind everyone and the audience that we are going to be taking some questions towards the end of the session. So that QR code when we when we pop it

up there and we'll save a couple minutes for that. So I'm going to start with you, B.J.. Can you tell us a little bit more about your career path to chief technology officer and sort of what parts of your current role touch sustainability? Yeah, absolutely. It's great to be here, everybody. And, you know, I've always been passionate about technology since I was a little kid when I got my first apple to back in 1984. But it's always been about, you know,

how technology can be used to solve different problems. And, you know, I was previously at Ameritrade prior to this. We were solving problems around investing. And so when the opportunity came up to join Johnson Controls and leverage technology to solve this great big challenge that we have around global warming and sustainability, it was an opportunity too good to pass. I had just read Bill Gates, his book about two years ago on climate change and and saw that 40 percent of all emissions were being generated out of buildings. And, you know, to come on board a

company that was really focused on solving these problems in the building domain, leveraging my capabilities and expertise around technology is just sort of a lifelong capstone for me. So that's how I got here. Yeah. That's great. And Kate, let's talk about that marketing angle of this.

So obviously, I'm assuming this has become a bigger part of your curriculum and your research. Tell us a little bit more about kind of that branding and marketing angle of this. First, I have to say, my first computer was also an apple to stand with, also 1984. So we maybe had the same Christmas that

year. A little orange screen, right. So, I mean, I'm in marketing and it's great to be here. A couple things prompted the interest that we we now have in sustainability. Of course, there's a lot of demand from companies, right. They expect there. And when our students graduate, they

expect them to be conversant in this language, to be able to speak to the problems that are going on from a research perspective. I actually started about a decade ago doing work on the circular economy, the sharing economy. And something very strange happened where you had all these sharing systems that were marketed in terms of their sustainability. But when I went out and I asked people why they were choosing to be part of a sharing system, the answers were by and large fairly economic. Like, yes, it's nice that this saves the world, but it's mostly nice that it saves me money. So there was an interesting tension there.

There was also this great work done where researchers identified something called the sustainability liability, where they found that consumers would infer that products that were more sustainable were also less effective. So that seemed like problem. But at the same time, we also saw that at least some consumers are willing to say pay a premium for these products. So that was also a very strange tension. And then we also started seeing all this positioning in terms of sustainability. And we kept asking what what what does

that actually mean? Sustainability can mean lots of different things. So when a when a company would call. Right. And it's perhaps a consulting client and say, what should we do about sustainability, it's very hard question to answer. So there still remain enormous numbers of unanswered questions in this space. And what emerges over and over and over

is this tension between, yes, this is valued and valuable and everyone wants this. And then again, I want to save money over and over. So it continues to be a dynamic conversation. And I think, you know, you kind of segment nicely into our next topic, which I'm sure everybody has heard this word ad nauseum. But let's go to greenwashing. And I think what you're speaking about is really, you know, there's risk factors, there's risks and rewards and all of this and proving business value, but also, you know, being authentic. So, B.J., I'll start with you.

I'm curious how the role of the CTO can help enable some of that transparency and accountability that chief sustainability officers and their teams in other parts of the business are looking for, since, you know, you typically tend to be the data, the data people at your company? Well, you know, as our chief sustainability officer would say, it's all about the data. Right. And at the end of the day, how do you collect the data? How do you standardize it? How do you basically equate that to what the scope one in scope 2 emissions are? What's your plan to actually reduce that using the technology platform? How do you actually track that out over time? How do you make those adjustments? So, you know, the business that we're in is we've actually built a platform called Open Blue to help companies do that to track. Your scope, 1 in scope 2 with the data verification and then over time set the goal setting targets. But it's also understanding where the sources of emissions are in, you know, your facilities, whether it's from, you know, each VAC equipment or whether it's from your plants and how is like one facility compared to another facility. So I think everybody is super motivated

about the challenge around resolving sustainability issues and reducing carbon emissions and climate change. But the operational piece of it is really, really important. You know, like you, because a lot of companies, they've just been focused on buying carbon credits, but they don't even really know half the time like what they have in terms of the emissions that they're creating. Right. And then beyond that, there's also Scope 3, which is what is what do all your suppliers produce? You know, that you're buying from. So I think like the data and the technology platform, it is so critical in terms of bringing transparency to all aspects of the decarbonisation mandate. And that's what we're really focused on at Johnson Controls.

And, you know, our chief sustainability officer, we want to eat our own dog food. So we're actually using that to sponsor an initiative across our major plants right now in our facilities to use the capabilities that we've built, the baseline, the data, and then understand how do we set our our carbon targets over the next 15 years to to make a meaningful dent on that. So it's an end to end process. And just like, you know, the financial industry where, you know, going through things like data, lineage and understanding computations and verifications was done during the Sarbanes-Oxley period. You know, I'm sure we'll go through the same sort of set of changes in the governance of the data around sustainability as well. So it's pretty exciting to see how all of this will come together. Yeah, absolutely. There's a lot of evolution in that

space. And I'm sure, you know, we're going to be continuing to talk about that throughout today's program. Kate, I'll go to you next. How do you sort of toe that line between compelling storytelling and an accurate portrayal of what a company is doing? Because, you know, the marketing and communications teams are really the ones who are getting these stories out into the universe, which can be a vulnerable position. Yeah, I mean, I'll say first that I love hearing. Yes, it's about data, right?

Marketing is always about data. You're telling a story that you can't connect the data. You have a problem. Right. And this kind of question, ISE makes me think of a story a friend of mine told where, you know, there's this thing called hay fever. I don't if anybody has hay fever. Right. But it's this constellation of symptoms. Right. And he started to get kind of sniffling

and he started to get kind of itchy. And he said to his dad, oh, man, how do I keep from getting hay fever and a sadness? I just don't have hay fever. I just don't have it right. It's a constellation of symptoms. But you decide how you interpret that. Right. So take your data and try to understand what kind of sustainability you have, because sustainability in one firm is going to be different than in another. And I would say own that.

Right. The truth is for some firms, if we're gonna go ESG, the E and the S are really strong. We hope the G is there or the G and the S are really strong and the E is less there. You can have your own flavor of sustainability. I would have the conversation about what that is, right where you can make the biggest difference, what you can actually change within your firm in the short and the long term. And you know, what we would do in research is we would often just brand that. We would say this is X kind of

sustainability or Y kind of sustainability. You know, we also talk we're doing some research right now on the difference between sustainability related to the materials and the process. Right. And we find that consumers interpret those very differently. And, you know, spoiler alert, what we

find is actually if it's not multiplicative or additive for the consumer, you can have one. And if it's real. That's OK. But be clear about what you do and what you don't do. And I think that's very possible.

But I think instead, what you end up with is an embrace of the same story across all firms and the use of the same graphics across all firms and the use of the same buzzwords across all firms. That's that doesn't work anymore. Right. We're in a postmodern age where everyone rejects the narrative as applied to everybody. So you have to move beyond that. You can't just use the stock photos and the stock taglines, know what your firm does and own that.

And, you know, kind of as a follow up to this on the crisis communications angle of this. If your company is accused of greenwashing, you know, rather it's through regulatory action or, you know, just your consumers in the public eye, how from a communications standpoint, marketing standpoint, what what should they do? How should they react to that? I mean, it depends a lot on what it's whether it's true or not. If you are actually greenwashing, then you need to step forward in transparency instead of backwards. But that's tough to do once a lawsuit starts. Right. So I've been an expert witness on a

couple of these cases where their class actions and they say, oh, you said that your product, your packaging suggested that your product was going to be eco friendly, but the product can't be recycled and 90 percent of city and doesn't really work. So, I mean, I think there are there are pragmatic steps that have to be taken and can't be taken. But what we do know is there's some research that I did not do, but some other folks said where consumers actually respect it. If you explain that, no, in fact, you did this and it makes sense for you as a business, because it is good for your business that if you acknowledge that your firm, too, has economic and financial incentives to do this, suddenly it becomes much more credible to consumers. They know that's real and they understand that firms make decisions in their economic best interests. So there may be a moment where you say,

actually, you know, here, here's what we're doing and we'll explain to you why it makes sense for us. And then they draw the line. All right. This does make sense for you. Of course you're going to do that. It's OK to acknowledge that you are also

a business that needs to make money works. OK, I want to pivot a little bit to, you know, some of the internal barriers and advancing sustainability efforts. I think the reason that we're all here today and you know, what our audience is very keen to hear are practical solutions to moving things forward. As you know, leaders of different

departments are trying to help out with this. What? From where each of you sit. Do you think is the biggest sort of internal hurdle in advancing those efforts forward? VIX. Yeah, I mean, I would say first of all, it's it's complex, right? And I mean, Kate said a lot of things around transparency and just, you know, figuring out what that framework and structure looks like.

But I also think it's a lot about, you know, starting somewhere. Right. And the internal barriers, you know, what happens is that you get these this big message around, you know, I'm going to decarbonise by 2035. Right. Like, who's actually knows what they're going to be doing in 2035 right now? I don't know what I'm going to be doing tomorrow sometimes. Right. And so. So when you're when you're putting out these big goals.

Right. It becomes really hard to kind of break down the problem into sort of smaller goals. Right. I'm a big fan of the book, Atomic Habits, Habits, and just really breaking the problem down into little things. Right. And so how do you find a champion somewhere in your business who's going to lead the way and break it down into smaller bits? Right.

And then figuring out, you know, how do I have the platform to do that? Right. And so that's really where we've started. We've said, OK, we want to be a leader in it. This, you know, we're a leader in smart buildings and, you know, supporting decarbonisation for other companies, leveraging our open, loose software platform.

So how do we take a small subset of our portfolio and show people how to baseline benchmark set targets, understand whether those targets are achievable and then show and tell. Right. You take that, you know, smaller pilot and then you sort of amplify it across the ecosystem. So it's you know, my own belief is that the barriers is that OK, when people make these like big projections, you know, nobody knows exactly what to do. And you need to have somebody who can start somewhere and do something. Yeah.

Yeah. And it's interesting because I think this is a similar discussion we're having with regard to, say, behavioral science a few years ago when companies were like, how do we get behavioral science through our hole, through our whole institution? And the statement that they'd say, well, everybody, when we come in and do a workshop and train everybody on behavioral science and then it's everybody's job and then it's nobody's job. And to your point, I think we do have to protect the role of that champion. You know, it's interesting because we know that everyone in a firm is in part responsible for the financial well-being of the firm. But nobody ever said, let's get rid of the CFO.

OK, somehow that survived. Right. And I would say when I look at this from a marketing perspective, that has happened in part because there's a common metric that everyone contributes to that speaks to the CFO. So we spend a lot of time talking about customer lifetime value. That is a metric that can be aggregated up to the financial value of the firm. And so if marketing is doing something, they need to be able to point to the part of that, whether it's retention or margin or even cost of capital. So that what they're doing makes sense

to the people in the C suite. And I think to the extent that you have a champion who has not only responsibility but also authority. Right. Because they say sustainability people

doesn't mean they have to be the nicest huggy est people. Right. Give them some teeth. Right. And there's a common metric that everybody else can speak to. You can move it forward.

But I would push against this idea that. Well, we'll just have everybody do it. Yeah. Because then then it's nobody's job. And it's a lovely idea. But I've seen it fall off when these new big ideas are pushed out. I mean, just add into what what Kate

said. I mean, I think that inherently the sustainability challenge is a set of tradeoffs. Right. And so, you know, it's easy to get stuck because think about it. Right. OK, you know, now we're returned to the workplace or hybrid workplace. And so now people are going to be back on the streets traveling, commuting.

That adds to your carbon. Right. You know, you're starting to think you have these buildings that are been largely unoccupied where you can turn down your h vac systems and stuff like that and reduce your carbon emissions. Right. And now you have people coming into those spaces again. Right. So it's the whole, you know, decarbonisation journey is inherent in its tradeoffs.

Right. And so that's why I think there's a tendency to get stuck. Right. And then people get that, oh, gosh, moment, you know, where they're like, OK, I need to do something this year. So I'll just go out and buy some carbon credits. Right. Which is not necessarily economically efficient either.

Right. So I think that's why it's really, really important just to like instead of being like, oh, it's somebody else's problem, having a champion who's going to say, OK, this is what we're going to do first. All right. And we don't need to solve the entire problem right now.

But doing something is better than doing nothing. Yeah. You touched on this a little bit, but I want to start a little bit more from each of you. You know, sort of the whole theme of our summits is making the business case for sustainability. So what can each of your respective

fields do, whether it be, you know, kind of getting that data gathering data? How can you join forces with the sustainability teams to really bring home that point forward to the CFO, CEO level that this is good for the bottom line? Yeah. So, I mean, fortunately for us and in the building space, energy efficiency and decarbonisation are basically like a match made in heaven. So, you know, the fact that if you can improve the consumption patterns of utilization of your assets and buildings, you know, being able to use software and technology that we've developed in our open blue platform to vary the different temperature controls and buildings, you can save money by driving more energy efficiency across the portfolio of your properties and reduce your carbon output. So that's how we've been able to do it. But I think across any business, energy efficiency is a real win win in terms of being able to drive the right behaviors around sustainability.

The other thing that that does is that when you get transparency around the biggest offenders of energy consumption, maybe you have an old chiller or maybe you have, you know, an older system doing one of your plants. You know, it also gives you the opportunity at that point to replace it with something that performs better, gives you more capabilities, and is also much more high efficiency and more green. Right. And so that I think is is a big lever that all companies should look look at as part of their decarbonisation business case. Yes, I'm in marketing.

And so we're always thinking about how the consumer views this. Right. That's where the value is going to come from. Marketing, and I think what I see when I talk with companies about this is they get that. So we've two big principles that we talk about, right? There's principle, customer value. You're giving them something they want. Second, the principle of competitive differentiation.

They get one right. You can run the surveys. You can say people care about this. This is great. But they don't get differentiation. Right. And if you don't if this doesn't differentiate you, it doesn't change price sensitivity from the consumer's perspective. It's pretty hard to justify as a marketer. So I would say marketing has to emphasize the way in which this can actually differentiate. And that in part goes back to the idea

that the way we do sustainability is not the same way everybody else does sustainability. So I think that's one piece. Right. Make this a differentiator. If it's not a differentiator, you shouldn't expect that it's going to drive positive consumer response in an in an out in a relative sense only.

You know, you're just table stakes then. Right. And the other thing that marketing can do is collect data. Right. So watch sentiment. When the firm does something that's sustainability oriented, what happens? Right. We can get this instantaneously. There's no reason not to. And it's going to be way better to get

those implicit measures, those monitoring measures, as opposed to just asking consumers what they think. Right. Because, yes, they're going to tell you it's great. Congratulations. Right. Right. We know what social norms are then, but we know nothing about what they're actually saying. And there may be a deafening silence. And that's also important for marketing

to communicate, because it's either that the signals too quiet like actions too small, or it's that the action is not being communicated in a way that resonates. So I would say those are, you know, differentiation and monitoring are probably the best things marketing can do. Great value props across the board. I would love to check in with our fearless leader Meg over here to see if she has any questions from the audience.

Mike Jack went to undo on Mike. Did you guys hear me? I can hear you. I liked your distinction between sustainable product attributes and economic ones and that consumers accept that companies can pursue both. Could you provide some more examples? Yes. So what we know about consumer consumers was sort of interesting piece and a lot of ways like studying them and being one of them. So we know something called equity

theory exists, which means that when a firm put something into a product, they're allowed to charge more for it. That's equity. Consumers actually value equity. It's part of their status as a dignified human right. And they will dignify other humans in the same way. They also have what we would call theory

of mind, which says I'm thinking about why the firm is doing this right. And increasingly, firms are being pushed to also demonstrate theory of mind about consumers to say, OK, I know how you see me. I see how you see. And we see each other and we understand what everybody is thinking here. And that's why you're seeing these interesting, ironic commercials where you see people making fun of their own product category, their own brand like insurance.

That's a demonstration of firms acknowledging that consumers understand how business works. OK. So I think the same thing plays out in sustainability. If you dignify your consumer enough to say yes, yes, you understand where business. Yes. We're driven by profit. And yes, this makes sense in that term.

It's a very similar thing as you're seeing in a lot of other industries in terms of demonstrating that, in terms of processes, the studies that we've run, I can tell you we do things like, for example, we take a take the same mug. Right. Very similar mugs. We protested to be similar like travel mugs. And we tell people this one was made with stable materials. This was made with sustainable processes.

This one was made with both. OK. And then we capture market share. And what's really interesting is you get a huge bump for processes. Huge. OK. You get a bump for anything, right?

We'll have one that's not sustainable at all. But it's processes that really drive it. And I'll tell you, I don't see that communicated that well. I see way more about sustainable materials and we add them together. It's not a significant bump in market share pass processes because consumers get that processes are more costly. They represent a larger long term investment, whereas materials and you probably know them make any difference and you can change that next week.

OK. So I would say, you know, you can lean into what consumers actually understand. They're pretty smart and and do more to communicate your long term commitment in terms of things like underlying processes, not just. OK.

This is this is a green material. I think just to add, you know, we're also at a unique point in history where, you know, the economic benefit of a product or capability and the sustainable benefit, you know, actually have overlaps now. So think about like heat pumps, which was something we're very involved with. You know, we have a strong demand for heat pumps right now because it is where the economic benefit is superior to some of the previous products. And the sustainability benefit is superior as well. And so I think, you know, as time goes

on and I've always seen this sort of in terms of the evolution of technology is that, you know, these attributes tend to converge and that creates, you know, a broader ecosystem. Right. I mean, I've been I was in the automotive industry before. And, you know, electric vehicles are nothing new. Right. But at some point, you know, with Tesla and some of the other companies that that economic benefit, that, you know, sustainability attributes sort of intersected to kind of create this tremendous market demand and switch over that's going on right now.

One final question. We talked a lot about that champion and we have a champion audience full of champions here. So I would like each of you to kind of talk to the sustainability teams in the room right now and tell them what's the one thing you would want them to know about your respective fields as they're collaborating a little bit more with your teams? Yeah. What I would say is that, you know, all of you represent sort of different roles in your organization. And I would not dismiss the importance of having the data and really having partnership around understanding the data and your ecosystem and how that data can be utilized. I mean, you know, this is probably

something that's been said year over year over year, around different types of problems that get solved. It's all about the data. And but for sustainability, I actually think that you can't get there unless you really have a good understanding or a partner who has a good understanding on the data. So my guidance to everyone as you embark on this journey is to have a really strong data partner and a data platform to help guide your sustainability efforts. Yes. So marketers want to tell stories.

So when you give them the data, please do two things. Tell them. What about that? Data is remarkable. Again, what differentiates you? Right. You can give them a huge number. They can try it out. And then somebody some enterprising

reporter says, you know, that's actually kind of a lousy number. We we don't necessarily know that. OK. So, yes, give us the data, but then help us understand what's happening and help us understand which pieces really make us unique. What matters there? OK. And then I would also say again, from marketing, encourage your marketing organization to capture response to specific to your sustainability related efforts. They don't know what's going on over there. They don't know that you just got rid of

all your old heat pumps. I've have no idea. Right. Unless you tell them. So consider creating some kind of calendar like an event calendar like you would for anything else. So that you're marketing folks might be able to pick up the signals that tell you whether that's moving any kind of perception needle. Right.

I don't think right now these types, parts of the organization tend to talk to each other except in an extremely abstract level. The more they know what you're doing, the more they can integrate into what they're doing. We're breaking down silos every day here at the Sustainable Business Summit. NIKKEI region, thank you very much for joining me. Thank you.

2022-12-08 12:24

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