ESG is Here to Stay!

Joan Michelson: Oh, thank you, Lisë. I'm thrilled to be here. Thank you for the invitation. I appreciate it.

LS: Absolutely. And in fact, I think you'll do a much better job of giving our audience a little bit of background and telling them who you are and what you do. And then I'll start grilling you with some questions. So give me some background.
JM: Okay. So the short version is I've spent many years in corporate America at Deloitte, American Express and Chrysler, and I've been working in the ESG space for about the past 17 years, including at Chrysler heading up communications and co-heading the sales and marketing for the electric car division called Global Electric Motorcars. And since about the past 10 years or so, I'm a journalist as well. In the past 10 years, I've been focused, zeroing in on this ESG space of clean energy, climate sustainability and diversity, particularly focused on women. And so I'm delighted to be here. I've been doing both journalism covering this space and doing some ESG consulting as well.
LS:Yes, you have. I've really enjoyed reading a lot of your articles and listening to you and listening to some of your guests. I think we probably should start right at the very beginning just explaining to people what is ESG. And for those of you out there for which it's new, we're talking about environmental, social and governance, and this is a way of measuring and monitoring a lot of the good and important things that organizations are doing that are really contributing to our sustainability and our opportunity to be a good corporate citizen.

And I know you have been working in this space for really a long time. And I was hoping that we could concentrate on this a little bit as you and I have been preparing and thinking about today. Joan, you were talking about some of the reasons why paying attention to ESG is so important. And a couple of things that you mentioned were really around the whole area of attracting and retaining talent. Can you tell me a little bit about that? Why should businesses be paying attention to sustainability, being good corporate citizens, and the whole field of ESG? Give us a little bit of background there.
JM:Well, there are several reasons actually, and I've written a lot about this and talked a lot about it. It's the 21st century is now the ESG economy. If you look at everything from recent surveys of corporate executives to the World Economic Forum, et cetera, between COVID and climate change escalation and extreme weather events and the social justice movements that have re-percolated, I'll put it that way, the past two years, and the shift that that's caused in the workplace in terms of working from home, et cetera, we've really had a fundamental shift in the economy where employees are demanding that companies align with their values and they're demanding that they take care of their environmental footprint and that they report on it with great accountability and transparency.

And so if you are a company, that you can't get away with not walking the talk. And on top of that, you have the Securities Exchange Commission and other bodies synthesizing all of the different sustainability standards out there now. And the SEC is actually putting together rules, as you well know as an accounting firm, to require that companies report their ESG footprint, including their impact on the environment and addressing climate risk, their social imprint in terms of diversity figures and how their employees are, their retention, et cetera, the various social factors and diversity on many dimensions. And governance is also, it's diversity of the board, but it's also transparency and being able to validate these numbers tremendously.

And so employees now are saying, "Well, look, I don't have to be in your office. I don't have to work for a company I don't want to work for." And there's talent demand right now. And so employees are saying, of any level by the way, "Show me what you're doing for sustainability. Show me how you're addressing climate." And then on top of that, you actually have, and we can get into this if you want, but you have the operational risk and you also have the sales risk, if you will, because government contracts and many of the larger companies, and even some medium-sized companies especially, are demanding now that you, in your proposal, address how you are addressing these issues because they want their values aligned as well.
LS:Indeed, indeed. It is a very large and complex field. And I think that a lot of our clients are just struggling to get their hands around it with where do we start and what does this look like and why should we do it? I also know that there's sometimes a little bit of resistance when they feel as if the pressure is coming from on high, whether it's outside investors or wherever it comes. So I'd be kind of curious, you'd mentioned about the fact that it is about measurement and monitoring and it's a numbers game, isn't it? When we talk specifically about ESG, it's about monitoring and paying attention to those numbers. I know you talk to your clients about these sorts of things as well, right?
JM:Yeah. And you guys are in the catbird seat really because, I mean, obviously I worked at Deloitte, I worked at the accounting division of American Express, I've worked with various regional accounting firms as well, mid-sized ones. I mean, you're already measuring the numbers, right? You're already validating the numbers. And so accounting firms are going through their own phase of reinvention and innovation where you can seize this opportunity both for your own business but also, I mean, to genuinely help your clients validate what they're talking about.

So if you have companies, clients coming to you and they either are publicly traded, want to be publicly traded or they do business with the government contracts or they have employee turnover issues, et cetera, I mean, a lot of companies are just initiating this and saying we need to validate this. You guys are already counting this, you're already measuring, right? And you already have the systems in place to facilitate other measurement. So you or the county firms are in a great position to be able to say, "Here's what we're seeing, here's where you might need to be to be comparable in your industry," and maybe even making recommendations to get there from your consulting teams. And I'm completely cognizant of the difference between the auditors and the consultants and how there has to be a division in there. Been there, done that.
LS:Right. You're absolutely right, there does. Although I got to say, I really appreciate the plug in terms of your accountants can be a very good place to start. We are finding that most of our clients are doing some really good things. They may be, for example, already focusing on diversity, equity and inclusion, which falls under the social part. They may be already paying attention to ensuring that their compensation practices and policies are in line with the market and they are fair across the organization regardless of gender, et cetera. They may be already doing things such as contributing to their local communities.

What they're not necessarily doing is monitoring it or measuring it or really talking in terms of impact. So I think that this is going to be a pretty significant change. And of course, and you and I have talked about this before, we like to concentrate on, what are they doing right? Let's really focus on what they're doing right first and then we'll build on that and we can find out what those gaps are and really take a look. One of the things that you mentioned a moment ago around risk, I think it's so interesting, are you finding that very many customers or clients that you're working with, are they focusing very much on things such as how the changes in climate may impact their businesses? Do you find that?
JM:Yeah. I was just thinking about that actually as you were talking is that there's part of what the numbers tell you is where your operational risk is. So I'll give you an example. I interviewed some time ago, Cindy Ortega, who at the time was Senior VP and Chief Sustainability Officer for MGM Resorts International. And she had been with the company for 25 years. She had been a CFO of their divisions as well. And she got into sustainability because she was looking at the numbers as the CFO and saw how much money they were spending on just powering their entire portfolio. Their energy bills, their electric bills were through the moon.

And so she said there's got to be a better way. Make a long story short, she said that they wanted to do clean energy strategies and that actually being part of Nevada Power with the utilities was holding them back. And so they negotiated their way out of Nevada Power so they could institute more clean energy policies, reduce their costs dramatically. And they found all kinds of ancillary benefits across the staff being able to use people in other ways with those decisions as well. And now they're a leader in the hospitality industry in sustainability practices and business practices.

So those are the kinds of examples of where all of these pieces fit together. And then you have companies that have operational risk where literally their plants are in areas that are prone to more severe hurricanes than they were before perhaps, or coastal sea rise. I mean, homes in Miami are now being built on stilts and raised up to address climate risk. And the insurance companies are addressing this much, much more than they used to. They've been frankly kind of late to the party, but they're really addressing this now.

I saw a study from Munich Re recently, the reinsurance company, that they're demanding now to get information from all of the companies having the insurance companies that they back up all get data on how companies are addressing their own operational climate risk. So yeah, I mean, nobody's messing around anymore. They're realizing. I mean, it's a national security defense. I mean, even the military has a huge climate risk mitigation strategy and a lot of that is reducing the dependence on clean energy, which of course with what's going on in the world right now would be a good thing too.
LS:Right, exactly. Yes. It's interesting, just picking up on something that you said earlier, I love the story and the fact that there are knock-on benefits from doing this within our own organizations. It's not just sort of a one hit wonder that sometimes if we can adopt some of these new practices, not only can it save us money and minimize some risks, but it can also help us to attract and retain great talent. It helps us to be able to maybe attract a different clientele or a broader clientele and so on. So there's a lot of combined sort of benefits for being able to look at our businesses this way. So I think you make a really good point.
JM:Yeah. I just want to say one other thing around that. One of my clients actually sent me a data point this morning that really caught my attention. It says a company's sustainability footprint and their culture is even more important to them than pay.
LS:I can believe it. We undertook a research project about this time last year talking to new graduates from universities. We asked them these questions about what was most important to them. We were really surprised and delighted by the answers. They absolutely wanted a good position and certainly they wanted to be paid for their work and so on. But the things that were really coming up as important to them were around organizational culture, environmental footprint, trying to make sure that they were doing work or they were working for companies that believe that having a positive impact on the greater good was just as important as making a profit. And this was the language that these young people were using fairly regularly. So I found that to be really touching and also really hopeful for the future.
JM:Yeah. Some of my guests who are sustainability officers tell me that their teams in recruitment have sent potential recruits to them to talk to because in the interview the people they want to recruit have said, what are you doing to address climate change? What's your sustainability footprint? What are your diversity numbers, et cetera, et cetera, et cetera.

And so you got to have that data handy. You've got to be fluid in your ability to talk about it too. Yeah, you can say I'll get back to you, but the more you can talk about it easily and spontaneously, the more it demonstrates your commitment and your command of that information, and you can talk about it hopefully with enthusiasm. It's really interesting, and it's of any age group really, across the board. And of course, right now it's important because we actually have five generations in the workforce at once. And it's really interesting because these dynamics are true for all five.
LS: Yes. Yeah. Certainly in our line of work, we're definitely seeing that. One other thing I wanted to just touch on while we have a few minutes left here, Joan, and that is, I'm so intrigued by the name of your podcast, the Electric Ladies Podcast. I'm also seeing that this work, corporate social responsibility, sustainability and ESG is certainly attracting a lot of women to this field. A lot of women are very interested. Are you finding that? And also be sure to tell us a little bit about your podcast and why you called it Electric Ladies.
JM:Well, I appreciate that. A couple things. First of all, I called it Electric Ladies because I interview women and I believe that energy and sustainability electrify and empower economies and businesses. I believe that the opportunity for innovation really drives better solutions, not just clean energy solutions, and that women are natural innovators and therefore supercharge an organization and supercharge their opportunities. That's the short version. There's a whole explanation on my website, electricladiespodcast.com.

But what I want to point out, and thank you, I want to pull out on something that you just asked, and that is, there's a really interesting new study that I did some stories on and I interviewed one of the co-authors of it by Heidrick & Struggles that showed that in the first half of 2021, there was the biggest turnover in the C-suite that they've seen. The main reason for that was that the companies were looking for a different kind of CEO. And when I dug into the data, they didn't pull this trend out. I mean, they pulled out the trend of the rise, but what I'm about to tell you is something that I saw on it, and she looked at me and said, "Oh my God, you're right."

When you look at the criteria that they said they were looking for, it does two things. A, it's all aligned with ESG. And B, it's aligned with the way women are known to be leaders. And what happened is when they went for a different kind of CEO, twice as many women were elevated to the C-suite than ever. Now, it's still not enough, but it's double, we'll take progress, right? So it's looking for resilience, looking for communication, looking for empathy in addition to hard skills.

So to answer your question, I think that a lot of women are attracted to this field because women naturally make decisions based on values, whether it's purchasing. And by the way, women make 85% of purchase decisions. So if you're a consumer products company, hello. And B, where they want to work and how they want to do their careers. So if you want to attract more women, that's another reason to be aligned here, but it works the other way too where women, because of those criteria, have tended to want to be in this space, no matter what generation they are. I've had women come to me and say, "I've been a foreign service officer for 20 years and now I want to work in the clean energy economy. How do I do it?" So it's every generation.

And then also you have women bringing these values to the sustainability table, to the ESG table, to any job they have. And sometimes I have clients who say, "Well, I want to do this work, but I'm not doing it in my current job. Do I need to leave my job?" I'm like, "No, not necessarily. Maybe you can do this work where you work." It's like, at EisnerAmper, you may be an accountant but you can use your skills in the ESG space right where you are.

So I think it's a complicated dynamic, but then women are contributing more. Women's thought processes and ways of innovating and solving challenges and raising different issues is really valuable and important right now. And the economy is really going in that direction anyway. And so more women are needed in it. I mean, it's a funny thing to say, but some women have said, "Well, men have messed it up all this far. We have to take it from here." Because we've had an oil-based economy for so long, and look at where it's gotten us. So I think it's both sides, it's demand and supply.
LS:Right. That's a very nice lead into the fact that we're coming up to Women's History Month, that's right, and it does seem to be a field, as I said, that is attracting a lot of women whether they see their place. I was actually interviewing a woman not too long ago that said, "It's just a natural fit because we're just so focused on the next generation. We're raising the next generation, whether they're our own or our extended family's children. This just seems to be something that if we can integrate this with the work that we do on a daily basis, then it helps to give our work even greater purpose." And that seems to be truly a Clarion call across our entire workforce, that word of purpose, extended purpose, understanding why we're here and what we do and what difference it really makes.

With that, I just so appreciate you taking the time to come and to chat today. I feel like we've only just scratched the surface on a number of really important topics. So I would so look forward to having you come back to visit, and I want to make sure that everybody heard to be sure and check out your podcast, Electric Ladies Podcast, because you do have some really interesting and wonderful speakers that are there. So again, Joan, thank you very much for taking the time. And for everybody else that's out there, thanks for listening today. And be sure to tune in again. Fast Forward is really focusing on everything that a business owner needs to be thinking about to make sure that you can thrive in the future to come.

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