Transcript: This is Climate: Business and Sustainability

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MR. BIRNBAUM: Good afternoon, and welcome to Washington Post Live. My name is Michael Birnbaum, climate reporter here at The Washington Post. My guest today is Ryan Panchadsaram of Kleiner Perkins, here to talk about betting big on innovations that might curb the effects of climate change. Ryan, welcome to Washington Post Live. MR. PANCHADSARAM: Thanks for having me, Michael. Good to be here. MR. BIRNBAUM: It's great to have you. You have a background in technology and are now focused in investing in innovative solutions for societal issues. Why are climate change innovations and technologies a priority for you? MR. PANCHADSARAM: Oh, that's a great question. I mean, for us, it's important because for two reasons. One, it--you know, the fate of the planet, and when we think about our emissions crisis, we need to invent solutions that can drastically reduce our emissions. But when you think about it, every emission that we produce is tied to business, and when you think about the solutions that can replace it, it's really this incredible economic opportunity, Michael, right? MR. BIRNBAUM: Yeah. And you collaborated with John Doerr for a book that lays out an aggressive plan to address the climate crisis. What is the role of technology in the plan that you lay out in that book, which is called "Speed & Scale"? MR. PANCHADSARAM: Yeah. So "Speed & Scale" is an action plan, and the beautiful thing about it is it's grounded in something called "objectives and key results," or OKRs. So we put out measurable goals and targets that we need to hit, and the first part of the book is all the solutions. And the second part is the accelerants, things like policy and politics, like winning those and turning movements into action, investing in innovation as well as putting more dollars behind investment. And so those four accelerants, Michael, are the things that you and I can lean on and pull on, and so when you think about the role of each of them and the different kind of roles we play, we can do a lot with them. So I can dig into whichever one you want to go first, but yeah, I'll let you-- MR. BIRNBAUM: Well, I wanted ask--so, I mean, clearly, we need to move swiftly to address the climate crisis. That's part of the point of the book. Is there a risk that we're already too late? MR. PANCHADSARAM: Ah. So, you know, the idea of--so is 1.5 degrees still a target that we can go after? If we kind of interrogate that question for a sec. So last year, the IPCC put out a report that had this table that showed us our carbon budget, right? How much more can we emit to keep warming to 1.5 degrees, to 1.6, -7, all the way to 2 or higher? And in it, it showed that we only have 400 more gigatons left to keep warming to 1.5, and so when you look at the models, it's really aggressive and ambitious for us to hit that, but it doesn't mean we move away from that target, Michael. Actually, it's really important for the developed world, like the U.S., Europe, and lots of parts of even China to keep aggressively cutting emissions as much as we can, right? We can't let that 1.5 degree target slip to 1.6 or -7, because if we change our sites, it likely means we'll end up at a higher degree, and so I think kind of the message here is every degree counts. We here in the Western world have to be as aggressive as we can in our emission reduction, and that can be a model for the globe. MR. BIRNBAUM: And what kind of technologies are you excited about? Maybe give us one, one or two examples of something that feels like really is effective in changing the--sort of bending the curve, really sort of pushing forward in terms of pulling down emissions and addressing the crisis. MR. PANCHADSARAM: You know, there's like the technologies in the short term and then the ones in the long term, right? And so, you know, in the opening video, it talked about the now and the new, right? Scaling up the now is going to get us to that halfway target by 2030, right? That's the things we've already invented. We just need them to be at scale, which takes a lot of work, right? That's solar, wind, storage, right? Those things need to be deployed. Electric vehicles, the electrification of cars, all the way to buses. You know, Michael, those are things that we have all seen and can actually see work at scale today. So that has to happen. But when we look at the complete arc to go from 2030 to '50, well, the harder debate sectors start to come up to us, right, things like how do we make our steel cleaner, cement and concrete; how do we deal with flight; how do we do long-duration storage so we can completely transition the grid? And so that's where the exciting new technologies that you see a lot of venture capital going behind. MR. BIRNBAUM: And so you've worked, of course, both in the public sector and the private sector. What's the balance between public-sector goal setting, lawmaking, regulating, and the private sector and investment? Where is the bulk of that change going to come? MR. PANCHADSARAM: Yeah. You know, when you look at the history of all this, it's like especially for the industries that you can buck under climate, there's such a relationship between what happens in the private sector as well what happens in the government. And so when you think about the technologies and investments that we need, a lot of them were started by government R&D grants, right? You go back to the '70s even, right, or even maybe when Kleiner Perkins was pioneering investing in cleantech. A lot of those companies received grants from the government, but then venture capital stepped in to say, how do we translate it outside of, you know, the lab or the academic place and turn it into a company that's then trying to scale it? And when we look at--you know, "Speed & Scale," looks back at the '05, '06, '07 first wave of cleantech and tried to figure out what went wrong and what were the successes that translated really well, and what you saw was, at least in the U.S. at the time, there wasn't enough capital to help scale these businesses, right? There were some loan programs that helped keeps some of the big marquee names working, but as a whole, you had other countries put even more support behind these companies. You think about what China did. You think about what Europe did. They saw these investments back in '05 and '06 as really important industries for them to own in the long term. You're seeing that come back to play right now when you think about the work that's happened under the Inflation Reduction Act, under the CHIPS Act, and then the Bipartisan Infrastructure Law. It's the U.S. saying that we want to own and dominate in cleantech, that we can't just invent these things in the U.S. We also have to scale these innovations as well too and really own that part of the cycle. MR. BIRNBAUM: And, you know, something I'm really curious about, can you tell us about perhaps an investment you made in some sort of climate-related technology or company that didn't go well and what you learned from that? MR. PANCHADSARAM: [Laughs] Yeah. Well, we wrote a whole chapter on this, Michael. This is--you know, when you look at cleantech 1.0, right, there was a lot of investments that--maybe I'll rattle a few lessons learned. One of them is you're going to need a lot more capital than you expect, right? And I think what you see about the most successful companies that made it through that wave is that they formed really good partnerships with both larger companies as well as the early-stage venture capital ecosystem and so around the table. You know, QuantumScape is a great example of this, where Volkswagen, right, large company partnered with early-stage investors to really take that company through its motion. So John Doerr always likes to say you're always raising, you're always raising capital to build these kinds of companies. The other piece that we learned is that at the end of the day, you know, you really are trying to win on cost and then performance as well too, right? Cost and performance, right? People aren't going to pick the clean green thing because it makes them feel good, right? That may reach 5 to 10 percent of the population. But if you really want to reach the world, it's got to be cheaper and perform better, right? I think this is why you see the electrification of vehicles going well is because not only are they performing really well, they're working their way down the cost curve. And when you think of total cost of ownership, it's getting really competitive. When you look at electricity and just the momentum that's happening behind solar and wind, that's not philanthropy. That's actually project financing at work. These are banks deploying that kind of energy because it can make them money, and that really is credit to the past, you know, 20, 30, 40 years of taking the invention that happened at Bell Labs, which would have cost, I think, on the order of $1.5 million to put solar panels on a roof; to today, that's around 20- or $30,000, right? The more we can move things down this cost curve, the more likely these products get deployed. And so when we spend time with companies, it's really looking at that curve and how they're going work their way down it, and it also helps with making some investment decisions as well too, because there's some technologies that won't make it down the cost curve, and so you may not take a bet there. You may pick one that might look more expensive now, but you can actually see how the model works its way down in the future to being really competitive. So those are some lessons and things we've learned. MR. BIRNBAUM: That's great, and it's really interesting. So thank you for that. I want to ask you a little bit about sustainable business practices as well, and we have an audience question from Rod in Missouri who asks, "What are some key indicators that distinguish companies who are genuinely committed to such 'common good' objectives from companies who are simply greenwashing?" MR. PANCHADSARAM: Yeah. This is a great question from Rod. So when you look at a company today, I think, you know, about 80 percent-plus have a climate commitment, right? They put a lot of marketing behind that they're good for the planet, but when you even unpack that commitment, Michael, most companies--we actually looked as part of "Speed & Scale," because, you know, we got this tracker online at SpeedandScale.com which has a list of the Fortune--well, we looked at the Fortune 500 global companies' commitments on climate, and only 6 percent have a clear net-zero commitment. And what I mean by that is that a lot of them say they care, but do they say that they cover all of their scopes of emission? Is it for all greenhouse gases? Do they actually have a target listed on their website when they want to reach net-zero as well as are they using carbon removal when we get to that point in the future and not leaning on offsets? And we only found 30 companies out of the Fortune 500 that meet that, and so we're working with these companies to try to get really clear about it, because in this ambiguity, that's where the greenwashing can happen. And we want companies to be really clear, because if you set a bold, ambitious target, it aligns your employees. It aligns your suppliers. My favorite example of this comes from Jim Hagemann Snabe from--he's the chairman of Maersk, right? This is the global shipping company. And he was telling us that when you set an incremental goal, right? Think about their ships. They're only going to tweak small things, and so him and these companies set this 2040 ambitious net-zero target because he needed everything to change, right? They needed to get new ships. They needed new fuel. They needed people to start producing it. And it wasn't just that it's good for the climate. What he and the board saw as well too is that in the future, countries that they start shipping to will have a carbon or emissions tax, and so if they continue as incremental business as usual, they're going to be an unprofitable business at that point in the future in those markets. So they're taking action today, and so, you know, Rod, part of it is what people say, right? It's got to be clear, but you also want to see that they're taking aggressive action, right, and making aggressive investment. I think one of the biggest culprits for greenwashing tend to be the oil and gas industry quite often. You know, when you look, they've got lots of good marketing, but then when you unpack it, I think, Michael, at the end of the day, just look at the numbers. That's like a big theme of "Speed & Scale." Just look at where they're investing. Are they investing in clean energy technologies, or are they still investing as in business as usual? And you'll find this huge contrast happening, right, places like if you look at the 2021 data for fossil fuel companies, companies like Shell and Total are investing more than 20 percent of their CapEx into clean energy, right? But then you come more domestically here, places like Chevron, Occidental, less than a percent, right? Like that's up there with Gazprom's zero percent, right? So, you know, look to the numbers. That would be my advice, Rod. Look to the numbers. MR. BIRNBAUM: Well, that kind of feeds into another question that I had about, you know, a lot of these companies are making high-profile commitments to sustainable practices. What's the best way to ensure that they actually do what they say they're going to do? MR. PANCHADSARAM: Yeah. MR. BIRNBAUM: I mean, can we trust them, trust companies to fulfill their sustainable commitments, or is it better to develop some sort of apparatus to actually hold them accountable for what they say they're going to do? MR. PANCHADSARAM: So what you're seeing now, actually, companies, a lot of them participating in two groups. One is on the disclosure side, right, because as a company, the first thing you have to do is measure, right, like what and where are your emissions coming from, and then you have to disclose and then immediately start working to reduce that. And so there's a group called the Climate Disclosure Project, CDP, that many public and private companies use to report and share what their emissions look like. But that's just one thing, just saying how much, right? And so there's another group called the Science-Based Targets Initiative, SBTi, that's working with companies to set for each industry what an aggressive but realistic target looks like. And so with the combination of the two, you know how much is being emitted and if a company is on track to reducing their emissions. And so, you know, these ESG reports, they all have some sort of flavor to them, and of course, we could get things more standardized. But when you look at them, I think what's key is actually seeing the reductions add up, and, you know, when you look at companies like Apple and a lot of the tech companies like Google and others, they have these really ambitious 2030 targets, Michael. So there's some companies worth looking at their reports because you can actually see them, you know, peaking and driving their emissions down, because 2030 coming really fast. And so they're working really hard to that, you know, that deadline. But when you look to other industries that are maybe more retail or consumer or harder-to-abate sectors, you're going to see targets that are really in the 2040 timeframe and the 2050, but we can't wait till then to see that curve peak and start to work its way down. I think maybe one thing--other thing worth mentioning there too is that just because a company is growing doesn't mean their emissions have to grow at the same pace, right? You actually can see from this cohort of companies that they're actually able to grow their revenue and profits while reducing their emissions. So this excuse of, well, I'm growing so I'm emitting doesn't always have to add up that way. MR. BIRNBAUM: So you were the--you're an engineer by training. You were the deputy chief technology officer at the White House. When you are looking for investment opportunities in this field, what are you looking for? What do you want to see from a company? What seems like a good--a good investment opportunity to you? MR. PANCHADSARAM: Yeah. I--you know, my kind of approach on this is like there's a few T's to look for Michael, right? It's like at first, we do really early-stage investments. So the team is perhaps the most important thing, right? Because whether--whatever idea this group has, they're going to go through the motions and cycles and have to actually figure out how to implement it, and so ultimately the team matters the most. And then we're going to talk technology, right? This team, can they actually build and execute on the technology that they're pitching, and does this technology have promise? What place in--you know, going back to the "Speed & Scale" key results, which one are they going after? Right? Is it one that's producing a lot of gigatons, or is it not even one of the KRs? Right? So that'd be a filtering piece. So good team, a technology that actually is going after a significant problem when it comes to emissions. And then you're going to look at traction as well too, right? Depending on the stage of this company that you're spending time with, traction is really important, and for early-stage companies, you may not have that traction just yet, but you can show that, you know, the technology you have, consumers want it or it's able to drop and replace. And as you can see, companies, you know, when they engage with larger ones, they have something called an "offtake agreement" that shows that traction is there, right? So, you know, a company that only has--you know, raised, made $5 million or $10 million, if you're able to hit these targets, I will buy that fuel from you, that cotton from you, that carbon removal from you, that energy from you. And actually, that's actually kind of like the inspiring piece to see where business is really stepping up. You know, you--to pick on some examples that quickly pop to mind are, you know, Amazon making that huge, big hundred-thousand-unit purchase from Rivian, pre-purchase, the offtake saying if you make it, we'll buy it, or Microsoft with its fusion purchase that it recently did, saying we will purchase energy from you in the future. I think Helion was the company, or Fervo and Google or, you know, Delta when it does a pre-purchase for fuels. And so those are powerful things to look at when an investor is assessing a company. So you've got team, you've got technology, you've got traction, and then, you know, the TAM, right, this market, where and how big can this company get? You know, these 59 billion tons of emissions, right, that emit each year are somebody else's business model. So if these companies are successful, they're not only drawing down emissions, they're actually going to be very valuable things. MR. BIRNBAUM: Well, great. Thank you so much, Ryan. We are unfortunately just about out of time. So I think we'll have to leave it there. It's really great to talk to you about all these issues that we've been talking about. Ryan Panchadsaram, thank you so much for joining me here today. MR. PANCHADSARAM: Of course. Thanks for having me. MR. BIRNBAUM: So don't go anywhere. I will be back in just a few minutes with my next guests. Thanks a lot. [Video plays] MS. KOCH: Hi. I'm Kathleen Koch. When we talk about how business can play a role in fighting climate change, there's long been a misconception that it comes at a price that sustainability and profitability can't possibly coexist. Well, technology is debunking that myth. Here to discuss how companies are reducing energy use and greenhouse gas emissions while propelling business growth at the same time is Calvin Emanuel. Calvin is vice president and general manager of Sustainable Growth Solutions at Ecolab. Welcome, Calvin. MR. EMANUEL: Thank you, Kathleen. Great to see you again. MS. KOCH: It's good to see you. Well, Calvin, what has perpetuated this myth of a green premium, that it will cost businesses more to operate in a clean, sustainable way? MR. EMANUEL: Yeah. Kathleen, as consumers, we oftentimes think about products that might be labeled as green having a higher cost than other products, and I think about a recent trip to the grocery store where I looked at some apples, and they were organic, and they were higher priced than the corresponding non-organic products. So there seems to be somewhat of a general idea or misconception that if it's green, it has to cost more. Or if we think about new technologies, new technologies, until they get scaled up, tend to cost more. However, this does not hold true in all places and in all industries, and the great news is it actually is possible for companies to focus on profitability and sustainability in the same vein. What we see is the climate crisis around the world is intensifying, and that's causing customers--our customers to look more closely at sustainable solutions, more especially water, because as they start to realize if they use less water, they will use less energy, and by using less energy, they can use--emit less greenhouse gases. And this is great for companies where they can drive sustainability and achieve profitability in the same vein. MS. KOCH: Calvin, are there any industries or geographies that are early adopters--or maybe I should say early rejectors in turning away from the green premium misconception? MR. EMANUEL: There are, Kathleen, and let me tell you. One of the things is water is essential to life, but it's also essential to business. When you look at a number of companies, water is either in the product or used in the production of that product, and leaders that are close in the supply chains know this. But this is especially true in regions and industries that have more in--that are more intentionally impacted by climate change through forces like drought or flooding. These leaders recognize these challenges and are very attuned to it. There's a couple notable sectors that I'd like to call out, and those are within the food and beverage and high-tech industries. These companies, especially those in the United States and Europe, have been setting a great example in this space. The F&B sector relies heavily on water in the production of their products. Think about it. Water is used to clean out the interiors of vessels and to make sure their products are clean and suitable for use. In places like global high techs, they use and demand a lot of water to cool their critical data centers, and we all are using cell phones and technology much more, and that drives the need for those data centers, and they have to use water. And so in part of this--so in a part from nature, from the nature of their business and the sensitivity to water challenges, we see these sectors among early leaders in an area ripe for opportunity. MS. KOCH: What role have recent technological advancements played in helping businesses avoid this false choice between profitability or sustainability? And I was wondering if you have any Ecolab examples that you could share. MR. EMANUEL: Definitely. You know, the greatest advancements that we've seen have come through digital, and when we talk about a digital, we're really talking about a digital enterprise view of a customer's operations. This allows the customer in real time to see where their operations are having challenges on a single site, but they can then look across an enterprise to see where opportunities are and they can understand which of their sites are best in class and which ones have performance gaps. So digital provides the visibility that's needed for customers in this space to really focus on where the opportunities are. And so we at Ecolab have created a new program called Ecolab Water for Climate, which is really designed to help our customers achieve their sustainability goals by focusing on water, and we do this by providing a holistic set of solutions that are chemical, that are definitely digital, engineering, and hands on, hands-on support to actually achieve those outcomes. And by doing this, we're really helping our customers achieve the sustainability outcomes which they're looking for. As an example, we've worked with several customers in the beverage and brewing industry where we've helped them reduce their water on average by 25 percent, which results in a 12 percent energy reduction and a 6 percent greenhouse gas reduction. And, you know, this has really been impactful for this industry, and it allows us to help these customers be more sustainable while focusing on their profitability as well. Ultimately, we believe by focusing on water, we can help transform the way the world thinks about water and its uses in multiple applications. MS. KOCH: Sounds like you're helping your customers and helping the planet at the same time. Calvin Emanuel, vice president and general manager of Sustainable Growth Solutions at Ecolab, thanks so much for joining me. [Video plays] MR. BIRNBAUM: Welcome back to Washington Post Live. For those of you just joining us, I'm Michael Birnbaum, a climate reporter at The Washington Post. My next guests are Mekala Krishnan from McKinsey and Tensie Whelan from NYU's Stern School of Business. Mekala, Tensie, thanks so much for joining us. Welcome to Washington Post Live. MS. WHELAN: Pleasure. DR. KRISHNAN: Great to meet you. MR. BIRNBAUM: Tensie, just to start with you, you're the founding director of the NYU Stern Center for Sustainable Business, which looks at the intersection of business performance and corporate sustainability. How can companies be held accountable for their commitments to sustainable practices in an effective way? MS. WHELAN: Well, I think they can be held accountable in a variety of different ways, first tracking their commitments, their targets. Are they focusing on what's material? So are they looking at sustainable accounting standards boards, definition of what are the most material issues for them to be focusing on? Have they made time-bound robust targets? Are they associated with international standards, like the Science-Based Target Initiative, like you mentioned earlier? Are they providing an embedded sustainability approach? In other words, are they treating this as something that's just off to the side, or are they really making it part of their business strategy as another area that I want to look at? And for me, that also--you can tell if that really is the case to see whether compensation is tied to their sustainability targets, whether their capital allocation strategies are tied to their sustainability targets. Those are a series of different ways you can assess that. MR. BIRNBAUM: And, Mekala, you've focused on the net-zero transition. What will it take for companies to make that transition on their own, or is it going to take force from the public sector regulation to push them into doing so? DR. KRISHNAN: Yeah. That's an excellent question. I think one of the things, one of the step changes, at least I feel that has happened in the dialogue in the last maybe five years, is companies are increasingly realizing that sustainability is no longer optional for them, right? This is not something that happens on the side in one part of the organization but really needs to be something that is embedded end to end across the organization. And there's a few different reasons for that. The first is that regulation and government action is starting to move. We've seen, for example, with the Inflation Reduction Act in the U.S., dramatic increase in incentives to drive action on sustainability. But it's actually much more than that. We're starting to see financial institutions factor this into their lending behavior, into cost of capital. We're starting to see more and more customers care about the issue. We're starting to see more and more employees care about this issue. And then lastly but certainly not least is we're starting to see more and more technologies that drive lower emissions actually come into the money. So this is not just something that is good for the planet and good in terms of reducing emissions but actually profoundly and fundamentally makes business sense. And so it's not just the right thing to do, also the smart thing to do, and so ultimately, I think, to me, the core driver of change for the private sector has been that sustainability is now about value creation. t's about managing risks and capturing opportunities. MR. BIRNBAUM: That's really interesting. Tensie, could I ask you--I mean, make the case for us. Is sustainability good for business? MS. WHELAN: Yeah. So we've developed a methodology that follows up on what Mekala was saying called "Return on Sustainability Investment," where we've identified nine mediating factors that drive better financial performance when you embed sustainability core to your business strategy. Those nine factors include risk mitigation, operational efficiency, employee engagement and retention, innovation and growth, customer sales and marketing, a whole series of benefits that any kind of good management could drive. But what we're seeing is that sustainability is that next wave of total quality management, of providing enterprise value. Just to give you an example, right, operational efficiency. So companies tend to think about waste as a compliance issue, but actually, it's the ultimate in an operational inefficiency. You're buying more than you need to pay to dispose of what's left over, right? So there's an enormous amount of--and we've seen this, for example, looking at a pulp and paper company that in the Southeast does not pay for water--negligible amount. And so they weren't really concerned about the enormous amount of water they were using, but their chief sustainability officer did an analysis and found out that the amount of energy required to move all that water around to heat and cool it and the wastewater disposal costs were actually costing them $1.5 million per mil per year for that free water, right? So there's a huge opportunity in terms of operational efficiencies. I would say on the innovation and growth side, those companies that are developing new products and services that both have improved footprints but also tackle things like what is the new packaging opportunity here, right, to move away from plastic, what are the circular solutions for textile materials where you can start to use discarded milk to make dresses, right? So I think that kind of innovation frame is also a really important opportunity here. And then the final one I'll point out is around employees. We've definitely seen--and we heard this mentioned earlier--that it's going to make more sense for you to be able to retain your people rather than to having to hire them, you know, regularly and to have high rates of turnover. It will also improve their productivity if they really believe in your purpose as an organization, and you'll be able to hire, particularly for the younger generations, the best and brightest who want to work for companies that align for their values. So that's also a significant financial benefit for you. MR. BIRNBAUM: And maybe just to follow up on that, Tensie, I'm curious. I mean, in terms of the biggest shifts or the most climate-effective shifts maybe that you see evolving in businesses and as you make arguments to businesses of the sort of climate case, is it always going to be about profitability? You mentioned efficiency, and I mean, you just--a lot of the examples you talked about were things that are both going to be more profitable and also are--you know, kind of happen to be more sustainable. Is that the main thing that you're working on, or are there going to be instances in which it's actually not more profitable or not significantly more profitable or maybe it just costs a whole lot of money to be more sustainable? But for--you know, in terms of the impact that needs to happen, you still need to get companies to behave in a certain way. I mean, how big of an issue is that, and how do you get companies to make that change? MS. WHELAN: Yeah. Well, so the first thing is companies are not tracking the return on their sustainability investment, right? They're putting in place sustainability programs, but they're actually not putting in place the ways to track those intangible as well as tangible benefits. So it starts there with really understanding what those returns are. Also, in terms of, you know, sort of engaging with them to help them improve on the financial side and the profitability side, what we see is that if you have in a given industry--let's say the automotive sector where we worked with a number of companies to assess what the key sustainability strategies are. We found 18 strategies, because there's a lot of material, environmental and social issues for that sector. Of those 18 sustainability strategies, most of them actually generated a net-positive, but some of them, like for example, managing for conflict minerals was cash out of hand. But when you looked at the entire thing--so as an example, through their waste management strategies, they had $235 million net contribution to EBIT annually that they did not know because CFOs actually do not track avoided cost, which is a significant part of this change, right? So when you looked at all the benefits on the upside of the strategies, then those where you had to make more investments that did not have that kind of payback absolutely paid for themselves. Also, if we're looking at things like significant capital investment needed to make a pivot, right, so sometimes really challenging for companies to make the argument that they need to make significant capital investments, but I think if we look at digitalization or other transformation moments, companies know that they need to make these investments to remain competitive, right? And that's where I think, increasingly, we'll see companies recognize that to remain competitive, these investments are critical in order for them to meet customer demand, because these customers in the B2B space are making these sustainability commitments. We're seeing an enormous amount of new products and services that companies are developing to meet those corporate commitments, as an example. And then on the B2C side, we do a lot of research around consumer purchasing. Sustainably marketed products are going--are growing twice as fast as conventional at a 28 percent premium on average. So again, making those investments in those products are going to take you where the customers are going. MR. BIRNBAUM: Mekala, we have an audience question here from Margaret in Connecticut who asks, "How can consumers best influence businesses?" I'm curious, your sense of that. DR. KRISHNAN: Yeah, absolutely. So, you know, if you--building also on what has been said, if you think about the nature of this transition, why is it really--why is it so hard, right, there are fundamental features of this transition that make it challenging. The first is that it is a universal transition, meaning every part of the economy will need to transform in some way if we are to reach net-zero emissions. Emissions don't just come from one pocket in the economy. People often look at the energy sector and point to that as the source of emissions, but it is every aspect of our lives. It's how we power our lives. It's how we consume. It's the nature of the products that we produce. So this is a universal full of economy transition. That's number one. The second is that this is what I would call a "significant transition." We have estimated the scale of capital that will need to be deployed in the transition, and we find that capital deployment will need to increase from about $5.7 trillion that we're spending today on all of these, quote/unquote, sources of emissions as well as low emissions, right, the entire spectrum. But that would need to rise to $9.2 trillion. So that's a step up of $3.5 trillion dollars of capital spending that we will need to make the transition. It's also a profoundly different way of spending. So today we spend on--primarily on what I would call "high- emissions assets." This is things like gas-based power, internal combustion engine-based vehicles. About 65 percent of that $5.7 trillion that we're spending today goes to high-emissions parts of the economy. Going forward, that needs to be exactly changed, and we need to spend about 60 to 70 percent on low-emissions assets. So this is things like renewables power--renewable-based power, electric vehicles. So it's both a fundamental step up of capital but also a fundamental redeployment of capital. And then lastly, this is what I would call an "uneven transition," meaning even though the entire economy needs to transform, certain sectors, certain parts of the economy will be disproportionately exposed, need to make more fundamental transformations. This is sectors that either directly contribute to emissions--so for example, things like steel or cement--or sectors whose products contribute to emissions. This is things like oil and gas or even automotive, right? So if you put all of that together, the universality, the significance, the uneven nature of the transition, what that means is that the entire economy--not just the private sector--the entire economy needs a catalyst to change. And so the question is, where does that catalyst come from? A large portion of that has come through innovation. As we've talked about, many of these technologies are now profitable. They're in the money. They make fundamental business sense. But many of them also come with an increase in costs of production for companies. They come with the need to make up-front investments, up-front capital investments by companies to grow entirely new businesses, and so companies need the incentive, that little boost to make that change. And consumers are one strong avenue by which that can happen. If consumers give a strong signal of preferences in a certain direction, that helps create certainty. That helps crowd in capital. That helps businesses have a north star on the direction of overall travel. MR. BIRNBAUM: And, Tensie, in your view, what companies are setting the best green standard for private industry and sustainability? What are some of the things you think they should be doing that could be a model for others? MS. WHELAN: Well, I think, you know, in the consumer package goods space, Unilever is a real beacon, not that they're perfect, as they would say themselves, but their sustainability strategy is their business strategy. There's no light between them, right? So it's completely embedded. They set very specific targets. They're very transparent about it. They also partner to achieve that. None of these challenges that we're all confronting can be handled by one company on its own. There's certain things that a company can do, but for example, if you look at cocoa, you've got to partner with your supply chain and with nonprofit organizations and with government to tackle some of the child labor and environmental challenges around cocoa production in West Africa. You cannot do that as one company. So Unilever has done a lot of that stakeholder engagement, which is really critical. Another area that I think--so it's the embedded sustainability strategy. It's stakeholder engagement. I would say as well that they tie--as I mentioned earlier, they tie compensation to their sustainability goals. They also have a very--they're really focusing on all the material issues that are going to drive negative impacts for them. So they're--they've, for example, made commitments around living wage, which is a real challenge for food supply chains and personal care supply chains. They've made commitments around packaging and solving for the packaging challenge. So I think, you know, they really are focused on what's most material in terms of their impact. And then I would say as well, they've been really focused on engaging with the consumer to provide products with purpose, and in fact, those products with purpose and sustainability DNA are outperforming. Their conventional brands have done really well for them. And then they're working on educating the consumer, because the biggest, some--in consumer-packaged goods, for example, the biggest part of the carbon footprint for a cup of tea, for example, is in you boiling a whole kettle of water for your one cup of tea. So for a CPG company and other companies to think about the total footprint of their product, both its use and disposal, is also a key element, and they're also working on that. So I would say there's a whole, you know, sort of different areas that they're focused on to understand and manage for their footprint but also to create business opportunities out of it. So they're both playing defense and offense. MR. BIRNBAUM: And, Mekala, tell us a little bit about the vantage point of CEOs. They're considering stakeholders and others when they are planning new investments and new business practices. What are CEOs looking at when they make decisions about their investments and their sustainability practices, and how did they balance? I'm interested in coming back to this question. How do they balance sustainability with profitability? DR. KRISHNAN: Yeah. It's so interesting that you asked this question from the vantage point of a CEO, because I think five or ten years ago, we would have been asking this from the vantage point purely of the chief sustainability officer of an organization, right? So one of the big shifts, I think, that has already happened in the dialogue is that this is not the chief sustainability officer's agenda on their own. This is the CEO's agenda. This is the board agenda, right? And why is that? It's because sustainability really affects every part of the business. We did what I think of as quite a fun exercise when we did some recent research where we listed every business decision that a CEO makes or that a company makes, right, so everything from how do I do risk management, how do I set strategy, how do I set an R&D budget, how do I think about my operations, how do I think about choosing suppliers, how do I choose about my--how do I think about my product portfolio. I mean end to end, the whole gamut. And we found that for each and every one of these decisions, it is possible, firstly, to apply a sustainability lens, and it's not just possible. It's now going to become increasingly imperative, right? Each and one--every one of these decisions now needs to be viewed with a vantage point of how does this decision change with sustainability in mind. And so as we talk to CEOs, there are four or five things that we hear repeatedly and that we talk to them about. The first is asking themselves the question of where should I focus my actions on decarbonization, and as we've been talking about, are there no-regret actions that I can take on decarbonization that both allow me to lower emissions but also allow me to benefit in terms of profitability? Are there no regrets? Are there win-wins? And repeatedly, we find there are many, many areas for operational efficiency, energy efficiency, et cetera, that, that sit in that--at that intersection. The second is this question of how do I think about capturing the opportunities that arise from the transition? So remember I talked about that $9.2 trillion of spend that we will engage with in the next 30 years as we embark on this journey. This creates enormous business opportunities. So the second question we often ask then is, what does this mean for opportunities to build green businesses? Now to your question about tradeoff, that comes with enormous challenges, right? How do I think about capital--reallocating capital between old parts of the business and new parts of the business? How do I think of an entire portfolio of initiatives that allow me to make big bets, make no-regret moves, and balance uncertainty and the uncertain pace with which this transition is unfolding? So what some of this green business building comes down to is just core expertise around capital allocation, resource allocation, bringing almost a private equity mindset to business decision-making. And then the third that I would highlight--and we've alluded to this a little bit as well--is this idea of partnerships, right? There is no way a company is going to go on this journey or be able to go on this journey alone. This is going to require engaging with their suppliers. If you want to think about end-to-end decarbonization across the supply chain, it's going to require engaging with financial institutions to actually get the capital that is needed to transform. It's going to require engaging with investors, with consumers, with regulators. And so this is much more building this ecosystem muscle. This partnership muscle becomes much more important than it ever was as we embark on this net-zero journey. MR. BIRNBAUM: I think we're pretty close to time, but maybe I can squeeze in one last question here. Tensie, you come from, of course, a nonprofit background. As you've moved into this space working more and more with the private sector and with business school students, have you been encouraged or discouraged by how the private sector is approaching these questions of sustainability? MS. WHELAN: I've been encouraged. You know, I mean, first of all, I would say my students, this is important to them. They're looking for jobs where they can make a difference and help tackle these challenges, climate change being the most pressing, but there are many others for their future and their children's future. In terms of business itself, I'm seeing just a fascinating amount of leadership here, right? There's so much innovation and excitement around sustainability by those companies who really believe that this is an opportunity for them and also a risk that they need to manage. And so I would say, you know, overall it's an exciting time. It's a challenging time, but just as we've seen other major transformations, you know, whether it's the Industrial Revolution, the Information Revolution, I think we're now heading into the Sustainability Revolution, and that creates enormous opportunities as well as risks to manage. But it's exciting for, I think, both practitioners and students. MR. BIRNBAUM: Well, thank you so much, both of you. Unfortunately, we are out of time. So we'll have to leave it for there. Mekala Krishnan and Tensie Whelan, thank you so much for joining us today. It's been a pleasure. MS. WHELAN: It was a pleasure. Thank you. MR. BIRNBAUM: And thanks to all of you for joining us here at Washington Post. To learn more about our upcoming presentations, you can check us out at WashingtonPostLive.com . I'm Michael Birnbaum. Thanks again. I really appreciate it. [End recorded session