In this Episode 

Shelley:  I'm wondering if you could just tell us how you see it and tell us more about the advanced performance materials category that you work in. 

[00:59] Jenny: Thanks so much, Shelley. It's a great question. You know, Chemours is a global company and we provide trusted chemistry to make lives better and to, you know, really help communities thrive. 

[01:10] And I don't think that many people realize the role that chemistry plays in their everyday lives, our everyday lives. You know, more than 95% of all manufactured goods are touched by the business of chemistry. 

[01:24] So really, chemistry is essential for everything that we depend on in modern society. And I believe it's really essential for decarbonization as well. If you think about the computers that we're speaking into, your cell phones that you use for stay connected to the world, but all the semiconductors and advanced electronics that underlies that and enables that, 

[01:45] right? And then as again, as we head towards green economy, electric vehicles, batteries, hydrogen economy, you know, ultimately and you know, all the electrolyzers and fuel cells, so we make the membranes and the materials that underpins all of that and really brings that to life. 

[02:02] A little bit more about Chemours. You know, innovation really is at our core, so we're focused on how we can make our products and applications, how they can really enable sustainability, not only in terms of our own operations, but but also for our customers. 

[02:16] So we tend to have very high-performance materials that our customers use because they need them in the application, whether it's, you know, chemical resistant, temperature resistant for the electrical properties, inert. 

[02:26] So they'll use them to solve their problems, which are usually very high-performance application needs. But then also those are enabling things to make society better and to reduce environmental footprint. 

[02:38] So we have three businesses. We have a thermal solutions and refrigerant business so that's refrigerants, heat pumps, et cetera. We have our titanium dioxide pigments business. And so that's coatings and performance, coatings and materials and paints. 

[02:53] And then we have the advanced performance materials business for which I lead sustainability. You know, some of the brands you might know, you know, Teflon, Krytox, Nafion, these are high performance materials that go into critical medical applications, electronics, we talked about some of the consumer advanced electronics, clean energy, electric vehicle batteries. The hydrogen economy is a big growth area. And then a lot of areas of transportation. 

[03:18] So whether it's a safety feature on an airplane, for instance, or the space shuttle, or many, many valves and hoses and other sensor coatings and things that underpin automotive, you know, both a traditional combustion engine as well as a lot of materials in the EV space. Those are the types of materials that our products go into. 

[03:37] Shelley: Let's dive into the sustainability aspect of some of those products. So, I know from your experience you've been a product manager before, but right now your team intersects on the business side and on a daily basis maybe touches different areas including technology, R and D and product managers. 

[03:54] I also know that Chemours has some strong sustainability goals as well. Could you tell us about what is in place that makes sustainably successful right now for the products that you're delivering on? 

[04:05] Jenny: Absolutely. You know, sustainability really is kind of at the center of everything we do at Chemours from how we operate our facilities, how we innovate our products, and how we engage with our partners, our customers, stakeholders, colleagues and communities. 

[04:21] And so it's foundational to what we do and how we run our business. So we, as part of our corporate responsibility commitments, we announced 10 bold goals in 2018 under the pillars of environmental leadership, sustainable and innovative solutions, community impact, and the greatest place of work to all. And these are goals to be achieved by 2030. And we are well on track for almost all of these goals. 

[04:46] One of our goals around innovative and sustainable solutions was to ensure that 50% or more of our revenue comes from offerings that make a specific contribution to the UN Sustainable Development Goals. And I'll talk about that a little bit more. Our methodology and how we do that and what it means for our business and really excited we've achieved, you know, as of end of last year, 48%. So almost half of our revenue is coming from offerings that make that specific contribution to the UNSDGs. Another area is the area of environmental leadership and again, kind of driving all these product and application innovations while lowering our carbon footprint. 

[05:25] So on the climate front we committed to a 60% absolute reduction in scope 1 and scope 2 greenhouse gas emissions for operations by 2030 and to being kind of on a journey to being net zero by 2050. We also recently had our science based targets approved including a scope three goal. So that's upstream and downstream of Chemours to reduce our Scope 3 emissions by 25% per ton of production by 2030. 

[05:53] One other thing I want to mention because it connects to how we make our products. So and I think a very bold goal and innovative goal that we had given the space that we are in, right, in order to make our fluorinated chemistries responsibility, we have a very bold commitment to reduce our fluorinated organic chemical process emissions to air and water by 99% and more by 2030. We're the first and only company to make this commitment. And that's really important because it gets both at kind of a very material issue for us that is important for our privilege to operate, but it also helps us to decarbonize at the same time. And I think that's one of our more innovative and bold corporate responsibility goals. 

[06:36] Neil: Jenny, when most people think of end users, right? When I'm making a product, like you said, maybe I'm making a cell phone or I'm making a laptop and there's chemicals in there that are enablers of certain performance. You are the manufacturer of those chemicals. I think there is an easy case to be made. When I think of the carbon footprint or the environmental impact of my product, I want to make it more efficient, I want to dematerialize, I want to use better materials that have lower cradle to gate carbon impact or environment impact more generally. When you think of environmental impact of the products you make being an enabling chemical, you could affect the performance of downstream products significantly through dematerialization. 

[07:16] You need less of it. If you can have certain accelerants or certain catalysts or if you are lowering the temperature of operation for a particular product using certain chemical, if you extend the lifetime of particular product. How do you look at sustainability in these use cases? Because I can imagine this is incredibly difficult. And given that you say that you also have scope 3 targets of which downstream becomes quite a significant part of the environmental impact of the products you make. How do you go about doing this? How do you even think about this? 

[07:46] Jenny: That's a great question, Neil. And I'll give an example of how we put this kind of to use and then I'll talk about our sustainable offerings methodology that we call Evolve 2030 and how we put that to life in practice. 

[07:59] So one live example exactly of how again, not only are we addressing our own footprint, but we're really enabling through our customers and the value chain. Right? That's how we can really drive a lot of the sustainability improvements. Electrification of the transportation sector is projected to increase the demand for lithium ion batteries by five to 10 times in the next decade or so. To shorten the production times of EV batteries. All the major OEMs and battery manufacturers are looking at how do we do this? You know, by removing solvent from the process. So we were able to innovate using our Teflon PTFE fluoropolymers in the development of solvent free battery electrode manufacturing. 

[08:39] The physical footprint of these lines is 75% smaller. Just think about that. I mean a significant difference in just the physical footprint and energy usage. We eliminate the need of the solvent, which is a reproductive developmental toxin, NMP. So also better for women in the workplace, reduces the production cost and then the battery performance will be significantly better if this is used at scale. But this is an example of where we've done the innovation. 

[09:05] We even had to, we built a battery lab, you know, to do this testing at our central research facility in Newark, Delaware. But we also need partners, right? We have to work very closely with our partners, customers down the value chain to do all this testing and ultimately enable this at scale. So that's just one example of how we enable sustainability through our products and applications. Now let's talk about how we actually measure that and when we make these choices internally, how we inform them using a data driven, science-based approach. So we partnered with Anthesis, who, you know, Jim knows. Well, I have a lot of connects with Jim kind of through my, through my history both at Chemours and in other companies. 

[09:48] We partnered with anthesis to develop Evolve 2030 which is a methodology to look at our sustainable offerings. It's based on the World Business Council for Sustainable Development portfolio sustainability assessment framework for the chemical industry. So we started this journey, oh in 2018 or even earlier and we developed this framework and what it does is it looks at basically product application combinations. So you always have to look at the specific application. So I just gave you an example of a PTFE kind of high performance plastic fluoropolymer in a EV battery manufacturing. If you're looking at a tubing in a medical application or a hose in, you know, on a space shuttle or an automotive, it's going to be very different. 

[10:32] So you're looking at the product and the application combination. And then we developed this framework partnership with anthesis, how you're looking at the imprint. So the overall impact to the environment and society of, you know, now I think it's 11 different attributes, right? So we're looking at our environmental leadership goals. I didn't mention the one that was a 70% reduction to landfill, the reduction to the fluorinated organic chemical emissions, air and water. 

[10:59] The overall greenhouse gas and climate impact not only of our operations, but also in use impact to health, you know, and human health and the environment. And then we also look at the social impacts, both pros and cons. Right. And then what's the regulatory landscape? This is a very dynamic regulatory landscape in the chemical industry and particularly in our space. So not only what is regulated today, but what's to come. And another very important element is public sentiment.. So in the end, I like to say that science is necessary but not sufficient. 

[11:34] So we base a lot of our decisions. All of you know, they're all science based and data driven. But sometimes you have to factor in perception, risk and those as well. So we have that and then we recently we just updated it this summer to version two, recently added circularity. So circularity of our materials and then also the packaging. So for each product application combination, which you can imagine takes a very cross functional team across the organization. And then we have subject matter experts in the mix. So we're doing that very detailed scoring. 

[12:09] There's so much behind this. And then we look and see, you know, what is, is it a net positive or negative impact and then is it a measurable contribution to society and the environment? And is there a measurable contribution that we can quantify and justify to a specific UN sustainable development goal? So and if it's in the upper right quadrant, so it's that positive impact to society and environment and a specific measurable contribution to a specific SDG, then we can count that towards our 50% of revenue goal. But either way, regardless of whether it counts towards our goal or not, that information is informing our decisions. So what we first spent the last five years doing is really learning and applying that to our existing portfolio. 

[12:56] Right. So we've built this methodology in partnership with Anthesis. We had it externally assured by LRQA twice, once when we first piloted it and again this year when we added the circularity aspects. We've built a lot of kind of management systems for the data visualization tools. Because we want it to be replicable, repeatable, keep all that good work that's been done so that we can refresh it and be utilized broadly across the organization. And so we have a lot of systems and tools and training that we've built over the last few years behind that. 

[13:36] Our next phase is really to embed that into our new product development process as well as our product stewardship and assessment process. 

[13:45] Neil: Cool. Is Evolve 2030 useful for any other sector? So looking at people, I think one of the big challenges that they have is think of any product that you have the more upstream you are as a manufacturer, the more applications you typically have of your product. 

[14:03] Jenny: Right. 

[14:03] Neil: And evaluating these pairs of product and use case becomes very complicated. I mean, the more downstream you are even, even electronics, something where, hey, it's power use. But actually the thing is how you use these computing capacities, right? Whether it's a data center, whether it's a small mom and pop shop, or it's your home use or your kid is using it, you have very different profiles and actually end up with markedly different results for these product and use case pairs. So is Evolve 2030 something that others could learn from and who would most benefit from this methodology? 

[14:44] Jenny: I think that others can absolutely learn from the methodology. That's why we publish it on our website. So I think it can really be used broadly across industries. It's probably most applicable to manufacturers. And then what companies will want to do again is take what's most material we incorporated in the inference scores, our corporate responsibility commitment goals, our environmental goals. And then other things that we think are material and important to our customers and our stakeholders. So the methodology and the framework holds and it's based on the WBCSD methodology for the chemical industry more broadly. But then I think companies can certainly use it as a model for how they would look at this for their specific space. Like you said, every industry is different. 

[15:26] Neil: But in manufacturing, are there any specific industries where you'd say, hey, you know, you should look at this? 

[15:31] Jenny: Definitely, yes, any industrial manufacturer. But then you could take it downstream. I think there are other tools as well for maybe some more consumer facing companies. But I think the methodology really holds for any manufacturer. 

[15:45] Jim: Yeah, I was involved with a chemical company out of Germany for a long time ago and they had developed some of the earlier portfolio assessment methodologies. And then that was in part of the World Business Council. And then you all have done that. And what I like about it is that you look at the entire portfolio, not just looking at a few products and a few markets, and try to examine, you know, which ones are really good and can help you with your 50% goal, which ones may not be as good and which ones may not help you at all. And my question is, when you look at that range of products and how they respond, do you actually get to the point where the ones that help you meet that 50% goal are given a incentive or a greater commitment and the ones which are may not be as good or may be phased out or sold, or another level of effort is put to make them at a higher level? So talk about that dynamics about the range of products within a company as big and as diverse as Chemours. 

[16:48] Jenny: Yeah, it's a great question, Jim. And you know, how does this come about in practice? Of course, we were quantifying the revenue towards the goals. What you'd measure, right. If you don't measure, it's unlikely to drive as much work and priority in a company. So that's important. But then how are we making choices that we're making within the portfolio? So one is to identify those opportunities. So some will be opportunities, right? What we're enabling, for instance, in a downstream market in terms of environmental benefit, but then also the risks to either downstream or to us in, in through our manufacturing process and our, to our business at any given point. 

[17:26] You have so many choices of where you would invest as a business. We have very specialized chemists and engineers working on our products and processes. Right. So you have to make choices at all times of where you're going to spend that time. And then of course, there's capital investment, right? Where are you going to invest the capital? And then, you know, it's all other kinds of strategy development, decision making. Right. So you're overlaying kind of the societal trends of where you're going to put the big bets. But you know, we're constantly, as part of our strategy and the execution of that, saying, okay, we're gonna fund this new product development. So we have, you know, many NPD projects in the portfolio at any given time. 

[18:08] And by integrating the Evolve 2030 process into our decision making, then we're able to say, well, this as at, you know, we have it at all stages. Right. So it's a stage gate process as we develop our new products. Stage 0, 1, 2, 3, 4, 5, and if you're able to have information that might rule out something at an early stage or reinforce that it's a good opportunity, then you'll continue to work on that. But the reason we have a stage gate process is at any point you might say, okay, we're going to proceed or we're going to stop funding and stop resourcing this opportunity. 

[18:40] Neil: This is awesome. Right? So you've got a method to measure, you've got a process to develop products and you say we want to integrate this methodology at each step as a kind of part of the stage gate. One of the things that we find most often is awareness is training in how to use this and how to do this. How do you organize yourselves in terms of helping this stage gate process implement this practice of including Evolve 2030? 

[19:07] Jenny: That's a great question, Neil, because that training and awareness is so essential to actually embedding this and making it sustainable, no pun intended, within an organization. Like on the Evolve process, we have training throughout the organization because it's technology, it's marketing, it's the product managers, it's the sustainability team and the risk assessors. And you have finance involved to procurement from raw materials. Right. So it's very cross functional. So one is training them on the methodology, but then also embedding it in the right processes. 

[19:40] So there's a methodology for how we actually do that product application combination assessment and the overall imprint and scoring. So we did training on that. But then if you look at for instance like the new product development process, several years ago we took, at least within the advanced performance materials business, we took the new product development process and kind of embedded it in DevOps. Right. So we have it in a system where we can kind of real time pull up all the metrics and it's not on a spreadsheet or so it's like everyone's working on the same system and out of this you have kind of supports the Agile methodology and you have user stories and all the things that build to what creates all of the different elements in a new product development. Again, you have the technology assessment, you have the market assessment, and then you have the sustainability assessment. 

[20:28] We put all the sustainability user stories, if you will, that support this sustainable offerings evolve 2030 assessment. And they're actually embedded into DevOps as user stories as part of our overall new product development process. So when you get to like stage zero, you're looking at different entry points. Marketing, sales, technology, regulatory, sustainability. There'll be certain user stories as part of our overall DevOps process that's tied to the sustainable offerings. 

[20:55] And then at stage one, you're kind of building out the market assessment further and you're looking at regulatory and sustainability considerations. Right. And then at each stage there's going to be user stories tied to this and that all goes into, there's a lot of training, you know, for the organization, but by bedding it into the managing process of how you're actually doing this work day to day, that's really critical. And then there's a lot of training and reinforcement that has to go. 

[21:22] Neil: But do you, do you have like a central function in sustainability or EHS that actually supports this, or have you embedded resources with this skill into the development teams themselves? Or is this a combination of both? 

[21:37] Jenny: It's, it's a hybrid model. So we have, in our corporate leverage team, we have subject matter experts who really are taking the lead on some of those assessments of the lifecycle assessment now we've added the circularity elements of packaging and the materials. So those true subject matter experts. And then we have product stewards that are embedded in the business. Right. So they know the products and the markets and the applications and they sit with the business on the same floor and, and work in those teams and they kind of own this process as it goes through. And then you have all the other, you know, technologists, marketing, procurement, everyone else who participates in the new product development process. 

[22:14] Jim: Right. 

[22:15] Jenny: And they own their own stories too. But this is sort of owned by say the product sustainability who's driving it. But they're both in kind of leverage functions as subject matter experts as well as sitting in the business. And we find that that is a best practice where you have product sustainability experts that are embedded in the business and know the business and the customers and the products because the technology is so different across our product lines. 

[22:42] And then you have kind of best practices, true subject matter experts who are leveraged across the businesses because they really have that subject matter expertise to kind of see trends across the different businesses and product lines. And they see more and more companies internally too. 

[22:57] Neil: Yeah, and I've seen more and more companies try to do this because I think the earlier days was you would have a separate function that is kind of the expert center of excellence approach. And this didn't really work out because they were too far away from the product itself. And then we saw a transition, or at least I saw a transition in the, in the noughties where they say, hey, you know, we need to put these people into product teams. But the Problem then is the standardization of methodologies and the evolution of those methodologies as a whole kind of fails. I think this thing of this hybrid approach is something that I've seen more and more pop up. It's great to see that you guys have. How long ago did you do this? Did you make this switch? 

[23:37] Jenny: Well, we've been working in a, I would say this hybrid methodology for many years and my role is really to lead the sustainability team within the advanced performance materials business. But I report to both the business president and sit on the business leadership team and, and I also report to our chief sustainability officer and part of kind of the corporate sustainability team. So we've tweaked it more recently, like even within the recent months. 

[24:03] Jim: A follow on question to that. When you think about sort of the end of life of not your product, but the chemical you sell to your customer, have you all developed sort of a collaboration with those end markets in terms of looking at how you do the innovation of the chemical to help them in their stage? 

[24:21] And then when their useful life of that product is over, are there a way that you can help them sort of go back and recover that the chemical? I mean, just thinking about that end of life dynamics is that. Could you describe a little bit? 

[24:33] Jenny: How that is done, the end of life? And let's say circularity is one of, I think the biggest challenges and really requires that partnership. Right. So that's something that gets me really energized. I know there's a lot of energy for it. Throughout our organization is we look at how do we ultimately scale some of these technologies and make them again sustainable, both from an environmental and a business sense. 

[24:56] So one example is our Nafion membranes are used in hydrogen fuel cells and electrolyzers, proton exchange membranes and water electrolysis. Right. So they're one membrane in the overall fuel cell or electrolyzer. And ultimately, if we want the hydrogen economy to succeed, there isn't enough supply in the world. Right. Of this membrane. So we need to find a way to recover and recycle and do this at scale. 

[25:24] But it has to be done in a technologically and cost effective way. It has to be feasible. So we're actually part of a consortium that's funded by the Department of Energy that's looking at end of life recovery and recycle for these membranes. But it's the whole gamut, if you will. To be honest, what's really driving this is you have these critical minerals, very expensive things like platinum, iridium that are part of these electrolyzers and fuel cells as well. 

[25:50] So we're interested in the ionomer that we make. Right. And there's not enough supply in the world, but it's not as valuable today, if you will, as the precious metals which people are working to recover. And the way they do today is they're recovering the precious metals and maybe discarding the rest. Right. And so we have to look at how do we actually develop the technology to take apart and disassemble these fuel cells and electrolyzers and then recover and recycle not only the catalyst, but the membrane, the ionomer. And the question is, do you take it back to the monomer? Do you take it back to carbon? You know, what is the most efficient way? 

[26:22] And through all of this, you also have, how do you exchange the information? Part of the grant is on digital passports, workforce training. How do you scale up not only to technology, but the knowledge? So we're doing a lot of work, that's just one example on circularity in our thermal solutions business. We're also working with partners to say, how do you recover and reclaim refrigerants? So in the end, it's ultimately, how do you use less material and then how do we also reduce. Reduce our waste and not generate it in the first place? 

[26:53] Jim: What I find exciting about that is that you have. You're identifying those are as an issue that you need to be aware of. And it's not like you ask the question, okay, what can I do? But who is the right team to collaborate with, to really come up with solutions? And maybe we don't have solutions today, but you're recognizing it's something that has to be dealt with and you're putting plans in place and putting teams in place and doing that collaboration. And coming out of that will come some excellent solutions, I'm sure. So that's good. That's very exciting. 

[27:27] Neil: Who's struggling, is this you or is it the product managers of these products? I'm trying to figure out, right, is this a sustainability thing or is this a product and business thing that's driving it? 

[27:38] Jenny: It's all. But it's very much driven by the business. So, you know, I told you, I returned to Gomorrah's earlier this year and I was really excited by the opportunity because of how integral sustainability is to the business. 

[27:51] And across the business, folks are thinking about circularity and these challenges, right? So we. They're in our goals of really part of the overall business strategy. And then I drive certain Things and some new product developments might have elevated because they're more driven by sustainability or regulatory considerations. So I might sponsor them. Right. And then others are sponsored by the business president or the general manager of the business. Some are more technology driven and we need innovative technologies, not only both analytically abatement technology, other technologies to recover and recycle. 

[28:27] So there's a lot of work being done on the technology front. So I collaborate very closely with the kind of business GM and the technology director and our teams do as well as again those leverage resources that are the subject matter experts. And then even, you know, if we have ventures that are focusing on semiconductors or hydrogen economy, we can collaborate. So it really is cross functional but very much embedded in the business and the business strategy. Cause I don't think it works otherwise. 

[28:55] Neil: I guess that's the advantage of having a way to measure what good looks like because then everybody can come up with their own ideas and ambitions about how to get there. Which I find very often. Some of the product managers I work with and have worked with in the past, they say, hey, you know, that's a sustainability team's job. 

[29:14] And it's primarily because, well, their goal is get a product market quickly that has the maximum value for the business and adds maximum value for the customer and do that in the cheapest possible way and all of those details. But this idea of hey, you know, I need to think about how my product will be used at the end of life. Yeah. Typically that sits in someone else's job description and I think it automatically falls into your own job description when the definition of what a good product looks like includes this and you have a way to measure it. 

[29:42] I think this is one of those take home messages for, for people, for listeners.. It's very hard to get the entire company to move in the same direction unless you have a way to measure progress towards that direction and set a goal of where you want to get to. 

[29:55] Jenny: Absolutely. And another important aspect I think is having it in the goals. So having it in the goals of the business and then it kind of flows down and then you have then resourced initiatives and projects that you then execute against. 

[30:09] Jim: You know what thing is interesting to me, I've been working with the chemical industry for I don't know, 20, 20 years or something and you know, 20 years ago we've had some of these conversations, but it didn't go anywhere. And now, I mean what you've done at Chemour's and some of the other chemical companies, they've really have embedded it into their operations. And what they've done is not make it a sustainability thing outside looking into the business. They've made it a collaborative team between the business with business goals and sustainability goals and they're working together. And each company is going to slightly do that differently. But that's the goal is to embed your sustainability metrics or green, you know, greener product metrics into the business decision making. 

[30:53] And you need expertise on the sustainability, environmental side as well as a business. And you can't have silos. You got to have a integrated team. And what you are doing in Chemours and some of the other chemical companies now were just like a pipe dream 20, 25 years ago. And now it's reality. And that's really exciting. 

[31:12] Jenny: It really is, Jim. You know, I was a product manager in another business I don't know, over a decade ago, right. And while I would say there's always been good consciousness and awareness of product stewardship and product sustainability, it really is much more embedded now and again, the ideas that people in the business bring and the opportunities they bring. Then we have resource projects that are sponsored by the business and circularity and other areas. It's really exciting. 

[31:40] Neil: But what was the 0 to 1? Because I think this is an amazing thing that you need to scale this kind of thinking, right? There was a day when it did not happen where it did not exist at Chemoris and then there was a day that it did. What was that day and what was the trigger moment, do you think? 

[31:56] Jenny: I think it's a journey. I don't think there is one trigger moment. I think it takes a lot of hard work. And I'm not. I mean, it's not perfect, right? I mean, this is hard. And how do you make it more efficient and how do you get the right expertise and attention? I'm not saying this is all roses every day. It's a journey. So it's a journey and it takes hard work and commitment. It takes leadership commitment as well. I mean, we have the commitment all the way up through our CEO and executive team. But part of it is culture, right? And so, you know, building the right culture is very important as well, but it's a journey. I don't think there's like one moment where a switch flips over the other. 

[32:34] Neil: I'm looking for the map of that journey, right? Something that we could standardize and we could say these are the things that you need to do to get to that step one, which is where there's buy into management. These are the things that you take to get to that next step, which is a methodology that you can use to evaluate what good looks like. This is what you need to do to get to that next stage, which is you embed it into the stage gate process. 

[32:56] I think there are leaders, I think sustainability, especially at this stage, where you're embedding it into the product development process, I think still resides with a very small group of companies. We call them the early adopters. But we need to get this mindset to the early majority. And I think for that we need to make it simpler. We need to learn from the experiences that you've had in the past, things that work, things that didn't work, and create that. What is the map to that state, that end state. And it's only when we can simplify it. And I think this is one of the goals of this podcast, trying to extract these kind of insights through experience and crystallize them for people who do not have 10, 15 years to invest in a process like this and need to get there faster. 

[33:38] Jim: Yeah, for me to speak the language of the receiver and if you're at the sustainability committee and you want to really get the product managers and the innovation, you really need to understand how the product managers and their terminology and language they use in the stage gate process and if you don't, you speak all this eco efficiency and things like this on sustainability and they don't understand it. And not that they're dumb, they're just different terminology, different language. And so part of what I think Chemours is successful is they're taking people from the, you know, environmental sustainability field and they're using the important impacts from sustainability, but they're converting it to the language of the decision makers on the business side. So that is to me is one of the earlier transformations that have to occur is be able to learn and speak the language of who you want to change to make better decisions. 

[34:33] Jenny: Absolutely. I couldn't agree more. Embedding it into existing processes. Rather than adding something separate and new is really critical. 

[34:42] Shelley: Jenny, I want to leave the final thought to you. What is something people in this space, product developers, product managers, what is something that you'd like to leave them with that could help them on their journey or is key right now for them to be thinking about? 

[34:58] Jenny: I. One of the most important things I know we really focus on is is focus, right? So focus on what is material for your company and for your industry. And that's why while these frameworks and tools can certainly be leveraged across industries, in the end you want to focus on what is most material for your business in terms of the impact the environment and society, as well as the opportunity for your company or business. 

[35:25] That's one parting thought.. Okay, I guess I'll leave with three things, right? Thing one and then two, right. Is what Neil said about needing to make it simple. 

[35:34] So and having to embed it, what Jim said into the existing system and process. So in order to make it simple, you have to embed it into something that's already being done, And then you need to educate people about what they need to learn and how they do. You have to do that over and over again and again. The last thing that I'll leave folks with is communicate, communicate, communicate. 

[35:55] So internally, it's celebrating those wins, those early successes, really lifting those up externally, right? It's educating on the details sometimes matter. The methodology matters, right? So ask your suppliers how they did this. Ask their assumptions behind their model. Sometimes the details do matter. It just takes so much communication to reinforce these messages, telling those stories over and over again. And have fun along the way, right? 

Links to Things We talk about 

• Evolve 2030 - https://www.chemours.com/en/news-media-center/all-news/press-releases/2024/chemours-enhances-evolve-2030-portfolio-sustainability-assessment-methodology  

Who’s talking? 

To read about who you are listening to, visit https://five-lifes-to-fifty.castos.com/ and click on our bios. 

We want to hear from you 

Do you have a story about how you are using what you heard? 

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We want to know! Write to us at contact@fivelifestofifty.com.  

In this episode, we sit down with Andrea Vaccari from Freeport to explore the rising demand for copper and its crucial role in the clean energy transition. From electric vehicles to wind turbines, copper is everywhere—but how will we meet skyrocketing demand sustainably? We discuss challenges in mining, the shift toward responsible sourcing, and why designing for disassembly is key to a circular economy. Whether you're in product design, manufacturing, or just curious about the future of sustainable materials, this episode is packed with insights you won’t want to miss!

In this Episode 

Shelley: One of the things I think is interesting and I think would be great to have you introduce to the listeners is the role of copper in the clean energy transition, because I don't think everyone appreciates how much metal is going to be needed to make that work. And it's also great context for those listening who might use copper or metal in their products. [00:44] 

Andrea: That's right. Copper and molybdenum especially are really, really critical for the energy transition. When you think about all of our low carbon or zero carbon forms of energy. So we think about solar, when we think about wind, when we think about hydrothermal, even just thinking about LNG and how LNG actually provides power to a grid, copper's in all of that. In wind turbines, offshore wind turbines need lots of copper. I think actually a few tons of copper per wind turbine to be able to not only power the wind turbine, but then the deep sea cables that connect them and that connect them back to the grid. We think about solar power and it’s not just a solar cell; there are batteries involved. And how do you tie a battery storage device to infrastructure and to the Internet? That's copper. [01:02] 

The simplest things, like developing nations, as they come along in the energy transition in a just way and we improve their grids, those are full of copper. Transformers, cabling in houses, as we improve green buildings, it's just everywhere. It really is. And then molybdenum is used in stainless steel and it's used in a number of other applications, but stainless steel especially and we know how much that's used in building and construction, bridges, all kinds of different applications for the energy transition. [02:07] 

Shelley: Is it possible to give us any numbers for that, like forecasting 5, 10, 30 years, like how much is needed? [02:36] 

Andrea: Right now the total refined copper market annually is in between 25 to 30 million tons a year and we expect that to double by 2050. Now you hear all kinds of different things. So, you hear people talk about doubling, tripling, quadrupling. I don't know, the way that I look at it is whatever number we come up with, we're always going to have the wrong number. But I think there's general consensus that it is at least twice. Just take like an electric car. So, if you take an internal combustion engine vehicle and then you take a fully battery electric car like a Tesla or a Mercedes, you're talking about three to four times the amount of copper per vehicle. And then you've got charging stations which are full of copper. [02:44] 

Neil:. Some of these models don't even consider the development that you see in countries which are not electrified yet. So, India for the largest part isn't really electrified and in the next 10 years we will see a huge part of that also taking shape. So, I think you're right. Some of the numbers that I have in my mind, more short term where we'll be needing 50% more copper than what we have right now in the next 10 years. And that's a crazy amount of growth that's needed. It's not 30 years from now or 25 years from now, it's, it's 10 years and to increase by 50% is crazy. [03:36] 

Andrea: It's massive. I think between the 1980s until 2020 ish, I think we basically almost doubled the refined market and then it's set to double again. That requires a lot of growth. It requires both primary and secondary. What are you going to do? Pull the copper out of the building so you can recycle it? Copper has such a long life and so you have a limited amount that you can make up from recycling. It's a huge opportunity for the mining industry. But we don't have two times as much water, we don't have two times as much natural resources to make each ton of copper. So, Freeport's view is we have to do that responsibly. We're accelerating the future responsibly, but that's going to require a huge amount of innovation by all primary producers. [04:14] 

Neil: What are the biggest barriers to us getting there? Let's take a short-term perspective. I think long term we can create lots of fantasies, but I have engineers and we're trying to help them build better products. They're not going to build them without copper and assuming that they'll need 50% more in the next 10 years than what they have access to right now, what are the big barriers to producing that much more and where will we get it from in current planning? [05:04] 

Andrea: I'll start with where it will come from. One of the big dynamics that we've seen in the last few years is that the amount of copper coming from developing nations is higher; that sort of shift is happening. Chile remains the largest copper producer in the world. It's around 30% of the world's copper. Peru used to be number two. Now the DRC (Democratic Republic of Congo) there's been a ton of investment and there's lots of relatively high-grade copper there. Multiple mines have come online there in the last 10, 15 years. We had one of them, which we sold called Tenke Fungurume to a Chinese company, and so there's a huge amount of investment that's happened there. Peru has had some unrest in the last few years politically so it's kind of fallen behind a little bit in investment.  But we have a have a huge mine in Peru called Cerro Verde, which is crucial for the Peruvian economy and the second largest city there, Arequipa. But what we see is those developing nations starting to have mines developed because in developed nations we have great difficulty with permitting. In can take in the United States and other developed nations a huge amount of time to go from the initial drill holes to a productive mine. It can take 20, 25 years. It's not just a permitting issue, but it certainly is a significant issue. It's an issue in Chile as well. The Chilean government is working on permitting reforms. The US government is trying to figure out how to do that better as well. But then also free prior and informed consent of indigenous peoples is an issue as well. So ensuring that you're working really, really closely with local communities and indigenous peoples from the very beginning of drilling, even just exploration stage, which is different than it used to be. So learning how to do that, learning how to do that well, and it's not easy, right? I mean the copper price basically needs to be above $4 a pound for companies like ours - we're a large Fortune 500 mining company - for companies like ours to invest in a 20-to-30-year time frame. [05:32] 

Andrea: That's like 20 years before you start making any money and boards of directors are highly critical of where we actually put our resources. So what's happened now? Like I said you have this shift that's happening: DRC used to be like 5% of the world's copper and now it's increasing and increasing and increasing. And there's some geopolitical power shifts happening. You've got prices that need to remain around $4 for us to stick in there for 20, 25 years, and then now you have the expectation of free prior and informed consent for any large project, which also takes a lot of work and a lot of time. [07:43] 

Shelley: I was going to ask, how does sustainability fit into this? I know you've had some involvement in the Copper Mark, maybe let us know about that and what sustainable copper and metals looks like these days. [08:22] 

Andrea: Like I was saying before, we don't have two times the water, we don't have two times the energy, we don't have two times the resources or people even to work at these mines to develop all that extra volume. And what we look at is really being a responsible producer and the whole copper industry. This is a great opportunity but it's also a huge challenge for us all. When I was working for the International Copper Association, I was there from 2016 to 2019, we created something called The Copper mark. The Copper Mark is essentially a responsible production validation process. It's 33 criteria that range everything from corruption and bribery to business integrity, compliance, human rights, indigenous peoples, as I was speaking before, environmental management, tailings management, everything you could think of when you think of what are the main, quote unquote, potential sustainability impacts of a mine. Essentially that whole framework or those 33 criteria have to be validated by a third party, basically audited, just to use plain language, it has to be audited every three years by a third party and every four or five years the criteria get tougher. For example, we just had our Cerro Verde mine, which is one of the world's largest copper mines in Arequipa, Peru. I was there last week, we just had it audited last week. The audit's actually more like a six-month process, but we had the on-site visit and one of the key pieces of it is that the auditors actually independently interview employees, third parties, external stakeholders, contractors with the offer of anonymity to basically provide feedback to the auditors on how the mine's performing across those criteria. For us we see it as, I don't want to use a hokey word, but it's kind of the promise. So we say, every single one of our sites globally is going to be assured against the Copper Mark and now the molybdenum mark and there's also now a zinc mark and a nickel mark, and we're going to keep that going over time. And that's our commitment to customers, stakeholders, local communities that we're going to keep trying to produce responsibly and we're going to keep finding new ways to produce more responsibly as the bar gets higher and higher and higher, if you will. [08:32] 

Neil: What is the kind of adoption for the Copper Mark? Because I could imagine, you just told us that the dynamic is going to shift where production will need to move to other places than what was done before. And these kinds of criteria, these kinds of certifications become even more important in places that we have not operated in before. Imagine I'm designing the next phone and of course we're buying copper directly, indirectly for our designs and we'd be looking for this mark. What is the percentage of copper that we can buy that has this mark versus not and is this really picking up? Is this something that we could say is the future of sustainable copper? [10:55] 

Andrea: That's a great question. The Copper Mark spun off and became an independent organization in 2019 and now has a multi stakeholder board, et cetera. We launched it in the March of COVID, and now have almost 40% of the world's mined copper is now Copper Mark. Newmont just had one of their mines in Australia certified yesterday. There are mines in the DRC. The mine that we used to own, Tenke Fungurume, is now part of the certification program. Glencore signed up their two mines in DRC. The whole idea of Copper Mark was to have it be a continual improvement framework so you could come in and you don't have to be perfect, you have to at least partially meets across the 33 criteria to achieve it. And then within 24 months you have to be fully meets. So you have two years to close those gaps. And the idea of that was that it's not about perfection, it's about progress. We want to raise all boats. The whole industry will do better if the whole industry is doing better and that was really the premise of the Copper Mark from the start. [11:32] 

Neil: So for engineers, people who are looking at purchasing and buyers or thinking of purchasing products that are made of copper with this mark, directly or indirectly, what are the other things that you would want to tell them, keeping in mind when they're designing products, potentially about how they use copper, what they think about in terms of how products should be recyclable or disassembleable? What are the things that engineers should keep in mind when putting copper into their products? Which I'm assuming almost everyone has to eventually do that, right? [12:48] 

Andrea: Yeah, I would say design for disassembly is probably the most crucial piece. Why? Because the challenge is when you mix metals with plastics, you have to get rid of the plastics before you can make that metal again. Perfect example, we have this new addition to our Atlantic Copper smelter in Huelva, Spain, where we've added a new, basically what we would call like a secondary smelter, so where we take end of life cables. Okay, so we take power cables from vehicles, from various applications, various different products, and we have to burn off the plastic. There's no other way to get the plastic off the cable. And that takes energy. How do we design these cables? When you think about a copper cable, it's got like a sheath around it and you have the wires in the middle and surround them in rubber or plastic. And so that's just a challenge. So thinking about the disassembly, are there new innovations that we can come up with that don't require them to be burned off, that enable physical separation as opposed to chemical separation, where you're basically just burning them. That's something really to be thinking about. But I think the best thing we can do is design products to last a long time. And the reason I say that is because copper doesn't degrade over time. You still have copper in some buildings that were built 200, 300 years ago, whether it's just little bits of copper for turning on lights from 150 years ago, whether it's old cables, whatever it is, copper can last in a building for its life. So that's something that I think about a lot. If we think about the biggest uses of copper, they really are to electrify our homes, to electrify our grid, and then also, of course, to provide power, to generate power. So when I think about that, I think about longevity. When we look at cell phones, or we look at cars, and if we're going to be putting four times as much copper into an electric vehicle, what are we doing to make sure we can get it back? Because it's infinitely recyclable. So design for disassembly, especially for the short life products like phones. [13:18] 

Neil: There are regulations that actually force companies to think of this: to repair. I think there's been disassembly regulations in the automotive space for now almost 15 years. I think this is where. But I think with Esper, there's a regulatory aspect that I think has not been as prevalent as it was before. With ESPR, which is the European Sustainable Product Regulation, the digital Product passport, so to speak, and one of those criteria that come in there is about disassembly, is about end of life and how to treat these products at the end of life. I think there is a mindfulness that comes in. And if you think of large companies, and if you're an engineer working for a billion-dollar company, you don't think I'm only going to make this product and sell it in the US or in India or in China. [15:37] 

Andrea: No, you design for the world. [16:30] 

Neil: And I think these are things that must influence design decisions early on. How can we make products where we can extract these precious materials much easier than we do today? [16:32] 

Andrea: When we think about innovations and how much has changed in our lifetimes, we're certainly not going to be designing the same way in 10, 15 years that we are today as we sort of cruise into the energy transition. And I think a lot of that innovation is going to come from European countries because of those regulations that really force that forethought. And we've seen it impact vehicle design right from the End-of-Life Vehicle Directive. [16:44] 

Andrea: When I first started working for Jim and Five Winds International in 1999 that was the work we were doing - was design for recyclability, design for disassembly for automotive vehicles. So when we think about things like cell phones and we think about the urban mine. What is that? It's this concept of how do you go to where these discarded cell phones are or discarded waste is and mine it and get it back. We know that so many of these do not go back, they end up in the landfill because people don't have easy ways to dispose of them or don't seek those ways out. So I think that's a key question, how are we going to safely urban mine to get materials back? But I also think about innovation. If you think about the challenge that we're faced with in mining, that permitting is getting harder, that gaining agreements is difficult, new mines are just a huge challenge, right? What we're trying to figure out is how do we get more of what we already have. So how do we take existing mines and go to old stockpiles which used to be below cutoff grade and find ways to get that copper out? And I think about those exact same things when I think about the urban mine and when I think about products in general, like how do we change our mindset about whether something is done and how to get it in life and keep it in life from the mine all the way to the end of life disassembler. We need to be thinking about innovation and how we just do things differently. And so at Freeport we're doing a huge piece of work on that and really for us, trying to figure out how to no longer have to concentrate and smelt. So there's a, there's a whole route of mining called SX-EW which is essentially solvent extraction and electrowinning versus traditional fire refining where you think of a big copper smelter. We're trying to figure out how to take ores that used to only be able to go through that process. How can we not do that? Which would have a massive impact from a carbon perspective. And so when I think about the product designer, I think about what is the impossible. If you had a conversation 10 years ago with any miner, they would say to you, oh, there's no way that you could ever take a sulfide bearing copper ore and not smelt it. But now we're all putting millions of dollars towards figuring that out and so I think the same thing about product design, like how do we just challenge ourselves and do things differently? Well, we have to cover the cables in rubber. Do we? That sounds very easy to say that, but I think it's what we have to do. [17:23] 

Jim: It's easier said than done, obviously. But I wanted to follow up on the procurement from the government. We talked about business to business and the products and governments buy products. But have you seen a major pull from the governments for the Copper Mark going forward? Do you see that entering into the picture at all? [20:11] 

Andrea: We do. We see that growing significantly. In fact, Copper Mark and the Mining Association of Canada and their program towards sustainable mining are working on basically a process of coming together in a single standard along with ICMM (International Council on Mining and Metals) and World Gold Council. And what we've seen is that governments around the world, mining governments around the world, want to adopt these frameworks and they really want to bring them in. And whether they make some part of regulation or legislation or not, or they just encourage it or will only allow certain incentives for mines that are certified. We do certainly see that the challenges still exist though for new mines. But I think we're starting to see that the Inflation Reduction Act has certainly led to a lot of conversations. The Minerals Security Partnership in the US is really trying to bring together Europe. [20:35] 

Neil: I think very often we underestimate the value of creating transparency or forcing transparency in supply chains. You don't want to find bad stuff in these supply chains and while you may not need to regulate and say you need to follow this standard; you will need to tell us that you don't. I used to tell our team, and we tell this to our customers as well, it's good you create your reports this year, next year, as the regulation stipulates it and then you do the year after that and then you'll do it the year after that. And then people will ask, not have you done your report or not, but why hasn't it changed and why isn't it improved? And I think that's this thing that in the next three to five years, as you said, we will not just change the products that we make, we will have to change how we make them and the kind of choices that we make in the materials that we put into them. [21:27] 

Andrea: Yep. There's no doubt and I think the battery passport is going to be a really interesting, to see how that evolves. One of the things about commodities is that the way in which they're sold can lead to a lot of opacity in the market. And there's this famous story, I don't know if it's a mythology, true or false, in our industry, that a very large European automotive OEM tried to trace their copper or at least get some transparency to their copper. This is about four or five years ago, and they studied it for 10 months and gave up. [22:23] 

Neil: Yes, that's not fiction, that's true. [22:58] 

Andrea: So it's also incumbent upon us and really the idea with the Copper Mark was, right now we certify the sites, we have a chain of custody certification that's just sort of burgeoning. So there is a chain of custody certification. Freeport has that now with two of our customers where we send them data on a routine basis with their deliveries - we send chain of custody data for cathodes. And now those semi fabricators are becoming validated or certified by the Copper Mark. Right. So the idea is that eventually the OEM or let's say the utility or whoever should be able to say, okay, X percent of the metals in my [product] are responsibly produced. But the challenge is we have all these OEMs that want all of these things, right? So we have Apple, we have Microsoft, we have Google, we have Daimler, we have BMW, we have Ford, we have all of these OEMs wanting things. But the middle of the chain where even less of the money is made, not very much money is made, is not passing through those demands. And part of the reason for that is that this side, the OEM side, doesn't want to pay any more money for it if it's responsibly produced. And so that's something I worry about a little bit. And I don't know what role the product designer can play in that other than just demanding more responsibly produced materials. But I will say that the automotive sector in particular is infamous for not paying any more for something that is produced better. Jim, we worked on that for for years and years at Five Winds. Right now we're trying to push it through the middle, and the middle's kind of like, this is a lot of work and a lot of money and then the OEMs are coming directly to us and they're just skipping the middle of the chain. And so somehow we have to fix this piece and that's where the opacity will get solved because if you can trace it obviously or create a digital passport or a token or whatever it is, that information can get through. And I think that's something where product designers can just keep demanding it and demanding it and the companies that produce products can keep demanding it, we'll get there eventually. But right now, for us, that middle of the chain needs work. [23:02] 

Jim: I want to follow up with the competition among the mining industry or the metals industry. With all the demand that's there for copper, 50% growth that we are talking about. Are the companies collaborating? Because there's so much copper that's being required that you're really going to have to solve some of these problems together as opposed to working in isolation. Could you just talk a little bit about that, that dynamic? Is that a positive thing, is it a negative? And where might it be positive? [25:40] 

Andrea: Yeah, it is the era of collaboration. We are involved in so many collaborations. I'll give you a couple. I mean Copper Mark is a great example. We have a number of climate related collaborations where we're trying to figure out how we electrify the mine. And so there's a number of those collaborations happening. There are hydrogen hubs, we're trying to figure out how to use hydrogen in our smelters, we're trying to figure out how to use hydrogen in our mines. I would say tailings is a huge area trying to solve or crack the nut of dry stack tailings. You can do dry stack tailing or filtered tails. Which I won't get into it. It's very technical. But you can't do it at scale yet. And the big miners need to be able to do it at scale so figuring out those precompetitive technologies is together is crucial. Look at ICMM, the International Council for Mining and Metals which we were a founder of, that is what we do there. We think about things like dpm, diesel particulate matter in underground mines. There's been huge leaps and bounds on that by working together and then working with the supply chain. Our own Supply chain, working with Caterpillar, Epiroc, Komatsu, any of those big producers that supply us with part, working on scope three reductions. I mean all of that has to be done through collaborations because we don't all of a sudden magically have more money. I think precompetitive technology discovery and then working together with our supply chains to help them innovate and deliver more sustainable products to us is crucial. For us we really see collaboration as something that is the only way that we're going to succeed successfully. Ultimately, right now, I would say the energy transition for us is the era of collaboration, precompetitive collaboration. [26:17] 

Jim: Dealing with some of the tailings issue, that's really a specific kind of a problem and there are going to be people located all over. So the collaboration is going to be fairly complex and not necessarily these normal meetings like we used to have and you could go face to face for two days kind of thing. How do you really make collaboration work? I mean I'm fully supportive. I mean in terms of what I've done in my career, collaboration is critical but when you think about the mining and the dilemma, how do you get that collaboration done in a way where you can really accomplish something? [28:16] 

Andrea: Well, and you can't do everything right. You know there's hundreds of collaboration forums for the energy transition and mining. There's hundreds of collaboration forums for electrifying mines and you really have to pick the ones that you feel are going to make the biggest difference, which is what we've done. But you know, when we think about tailings, that's an interesting one. They just had a forum down in Peru and you know you have GISTM, the global international standard for tailings management that was developed within the ICMM and external stakeholders just coming together, talking about the implementation, talking about new technologies, sharing ideas and thoughts can spark a lot of things to happen within companies. And so those are not huge commitments. Right. It's a huge commitment to implement the GISTM but it's not a huge commitment to get together virtually and have these good discussions and then a few times a year get face to face. Where the rubber really hits the road or maybe the copper is smelted. I don't know if there's a new way of saying that is ultimately where you get multiple funding sources together to focus on a totally new technology. And I think that's where we're looking at new tailings technologies, where we're looking at mine electrification and really honestly leaching. So looking at these new ways to avoid having to concentrate and smelt sulfide bearing ores, that'll benefit the whole industry. And we do those in forums and some work, some don't. But being able to do this work virtually now, Covid really helped with that. You know, mining is a very conservative industry. Like you're not actually working if you're not at a mine or you're not in an office building. Covid totally changed that and I think that's really helped us on the collaboration front. [29:00] 

Shelley: Mining is a really interesting sector because it's in everything, it's everywhere, but not everyone knows about it. So, Andrea, I really appreciate some of the insight you've brought for our listeners today on the copper mark and this idea of designing for disassembly. I really want to leave the final comment to you. A final thought you would like to leave our listeners with today. [30:42] 

Andrea: This is something that the mining industry is working so hard on, is opening up its doors. The general norm or view or belief of a mine is that it's a dirty, terrible place where stuff comes out of the ground and it's unsustainable. But what we're seeing more and more and more is that mines are becoming much more part of the fabric of their communities. They stick around for 100, 200 years. They are a huge investment on the part of a community. And I think helping just everyone, whether it's a product designer, whether it's somebody three communities away, whether it's high school kids, junior high kids, helping everybody understand how crucial mining's role is and how much it can get better and be better, I think is really what we see as crucial for the future. We can't not mine or we won't have these products. And so rather than turning a blind eye or saying, well, I'm not going to buy from that country or this country, instead lifting the veil and having those hard conversations about where is my product coming from, is that okay? Is that not okay? How do I change it? I think that's really, really important. And I really appreciate you guys doing this great podcast to really help explore that and I think the more product designers can do to sort of educate themselves on what is in their products, the better off we'll all be. [31:00] 

Links to Things We talk about 

• The Copper Mark- https://coppermark.org/ 

• EU Ecodesign for Sustainable Products Regulation (ESPR) - https://commission.europa.eu/energy-climate-change-environment/standards-tools-and-labels/products-labelling-rules-and-requirements/ecodesign-sustainable-products-regulation_en#:~:text=The%20Ecodesign%20for%20Sustainable%20Products,can%20significantly%20impact%20the%20environment.  

• EU Right to Repair - https://www.europarl.europa.eu/RegData/etudes/BRIE/2022/698869/EPRS_BRI(2022)698869_EN.pdf  

• EU End of Life Vehicle Directive - https://environment.ec.europa.eu/topics/waste-and-recycling/end-life-vehicles_en  

• ICMM (International Council on Mining and Metals) - https://www.icmm.com/  

• World Gold Council - https://www.gold.org/who-we-are/what-we-do?gad_source=1  

• Minerals Security Partnership - https://www.iea.org/policies/16066-minerals-security-partnership  

Who’s talking? 

To read about who you are listening to, visit https://five-lifes-to-fifty.castos.com/ and click on our bios. 

We want to hear from you 

Do you have a story about how you are using what you heard? 

Is there a question you would like answered? 

We want to know! Write to us at contact@fivelifestofifty.com.  

In this Episode

Shelley: Merck is a global life science company. Tell us more about the field you're in and the sustainability culture at Merck. 

Jeffrey: Yeah, absolutely. So, we are one of the places that most all scientists know of. If you're not in science, you may not have heard of us, but basically we are the one stop shop for scientists to get all of the materials they need to do discovery R&D and then manufacturing for things like pharmaceuticals, drugs, therapies, treatments. But also, certainly if you're in academics, you're doing academic research, we're a place that you're going to go to. But we also do other things like testing. So, if you need a standard to look at the quality of something like what clean dirt is, well, we're the people who make clean dirt that you actually measure against. So, we have such a wide array of things that we're involved in. Like I said, you may not know about us, but we're probably interacting with you in one way or another throughout the day and hopefully helping you make your world a little bit better. [00:40] 

Shelley: And I understand that sustainability is deeply embedded into your process. Tell us about how sustainably gets embedded into your product development process. [01:33] 

Jeffrey: One of the things that I was given as an instruction, in terms of our ambition regarding sustainability was we don't want this to be just a showcase product here or there. We want this to be something that is systematic within the organization. So that was the guiding light - I was told you need to make it systematic. So, because of that, we looked at the different ways we could go in and address systems, because that is the key to change. So, we try to find where that lever point is in each of our different processes, and that's where we go in. So, for product development for us, we use our product development process. We have a system called accolade, where everything is tracked and driven through. That was the point really where we identified to say if we can get sustainability embedded there, we're going to start to make the change or the transformation to a product portfolio. We have 300,000 products, so it's a big challenge in front of us to think about sustainability across the board. But ultimately that's the place where it starts when we think about the products themselves. I think for us, that's really what we've been thinking about is where are those key lever points that you've got the ability to then take more control into the process and give people guidance about what we're looking to do and the changes that we need to make. [01:43] 

Neil: Jeffrey, 300,000 products, how do you start? [03:00] 

Jeffrey: I cry a lot. No, this is the hard part when you think about the volume of products that we're talking about, is that we don't have one big thing that you could address and so that creates for us a challenge to say where do you start to focus? And one of the things that I think we've learned over time is you start where people are willing to start. When you've got people who are willing to go, that's where you start making these inroads and then you build and you learn. One of the things that we found out was if you look at something like solvents - this is a commonly used product, so if you're not familiar with that term, if you think about acetone or nail polish remove is a great example of a solvent, there are a lot of cleaners, so it is a relatively common material. But those materials are typically made from fossil fuels. And with the statement of fossil fuels, you know that there's going to be CO2 related to that. So, we've been looking at the ways that we can integrate bio based materials into that. But the bigger factor is that equates to about 10% of our scope 3.1, and scope 3.1 is purchased goods and services. So if we think about where impact lies, more than 60% of our footprint sits in scope 3.1. So, when you get 10% of that portion, and I apologize for all the percentages of breaking things down further, but that's one of the biggest pieces of the pie that you can actually get at. So, Neil, that's one of the things that we start to then look at is where can we have as big of an impact? And I say that with limited relevance. But where can we have big impact and then focus in these kind of bigger strategic moves of the changes that would need to happen and then start working our way out to see what kind of knock on benefits exist. [03:05] 

Neil: You said something very interesting. You said we start where people want to start. What's the drivers that make them want to start? [04:47] 

Jeffrey: Yeah. With 28,000 people you get a range. You get people who are eager and who sustainability really matters to. It may not be their core job, but it's something that they're interested in and they realize, they make that connection that they can have an impact and they just need the guidance and the understanding of what actually can they do. So, part of our work is to encourage people because even though as much messaging as we send out into the organization, people are like, is it okay for me to proactively work on sustainability? Yes. But then it is really helping those people with how do you quantify? How do you think about the right areas to make changes of your product lines? Where are the hotspots and what are the things that we're trying to accomplish? So, we identify those people. They kind of self identify themselves; they reach out and they're like, hey, I do this and I would love to figure this out. So, you grab those people early on because they are your flag bearers who then go out and then become the people who, if they haven't had a successful experience, we convert them and then they become the messengers to their colleagues in those areas to say, hey, this actually wasn't that bad. We think a lot about like the customer service aspect of this because we can't control, we can't tell people this is what you're going to do. But what we can do is we can influence. And so we're very effective influencers and we build those relationships, our jobs get a lot easier and then we also see those results expand. So I think it's really about the experience, Neil, that we give that R&D scientist to try to make it a really welcoming, interesting environment that they can succeed in because that's going to create a return and expansion. [04:55] 

Jim: What are the roles of these people? Are they the product managers or are they procurement or they're the marketing? Could you talk a little bit about the roles of those people? [06:34] 

Jeffrey: So, one of the first people, and my team really reminds me because I certainly focus on the R&D scientist, but it's really important because it is a complete ecosystem of people. But mostly I think the focus here becomes the R&D and the product manager. So those two people become the key elements there and what we're doing with procurement, because they become a factor of this. But what are the things that we're looking for them when we do new material, innovation, sourcing? What are the things we're looking for? How do we start building a wider bench? So, I'm not going to say not important, but a lesser, slightly different role. But the R&D scientist - you are the person who really is responsible for developing and technically making this work. So, in my viewpoint, that lens, that's still a really critical person or people to make this move. But then the product manager has to figure out the positioning in the market, really reinforcing a voice of customer, and making sure we're feeding in information about why this matters. What we find, and it's very interesting, is the individual scientists, so our customer, while they may care about the environment, and I think we would say that from a persona standpoint, you see this interesting shift start to happen when it comes to them executing their work. Because if you add another layer of complexity into the completion, wait a minute, now you're messing with the scientific process and they've got these established methodologies or processes that they follow, and those work exactly how they were lined out centuries ago, a decade ago, whatever it was, two decades ago. And this was a really important thing. So your customer, your bench scientist, for instance, may not be voicing that specific desire for sustainability, but if you go then to that person's colleague who is in procurement for the customer, they're going to be saying, we need you to figure out how to fix this and change this and reduce the impact. So it's making sure that our product manager is getting a wider range of perspectives and hearing all of these things to understand that we need to balance and figure out the efficacy of the product, but also the sustainability as a component of it as well. [06:42] 

Neil: This costs money though. This costs time. Right? If someone has a good idea and says, hey, you now want to pursue this, you say, yes, let's do that. But there are always competing priorities. What is the driver for those to be prioritized within your organization? Is it customers? Is it regulations? What is it? Is it access to market? [08:49] 

Jeffrey: I would say it's always customer and I think we also would look and say it's competitive advantage. It’s my belief, and I have a very different view if you talk about regulations, I think a lot of people started off in this space and there's still a lot of people who work in a risk based mindset or a risk based approach. And I just, I don't take that view. My view is literally the opposite, as far as you can get part of the spectrum where it's really opportunity or entrepreneurial based viewpoint. And the reason why that matters is because all of those regulatory things will be taken care of because you are not just trying to go to the lowest minimum to meet whatever's being set. You're saying we can set the threshold over here and then guess what, we're going to comply with and we're not going to have to worry about the regulatory aspects because we're thinking about how you do this differently. But then, Neil, the important part that you brought up, which is cost, right, and I would probably be your least likely candidate. If you go back to some of my teachers in high school and college, they would be like, there's no way that guy's doing numbers and business cases. But I am now just a huge advocate and proponent for really having a clear business case. And I think what we have found is that there's a tremendously remarkable business case for sustainability when you actually start and do those calculations, because you look at the competitive lift that can happen from a sales standpoint. You look at reductions of manufacturing cost or material selection cost and some things, right? There are trade offs of course; I'm not going to sit here and say everything is going to be a win. But we really operate from a debits and credits mindset where we're creating a ton of credits in the system in terms of savings from energy efficiency, other things that when we come back and say, okay, we need to use a debit over here, it's not going to be huge, but we want to make an investment because that's going to be a strategic advantage to move X, Y or Z. And I think that piece always comes back to there are always trade offs, there are some things that are just going to be more of an investment, but there's other things that you're going to find savings. So, in the worst case, you come out at a wash. And I would say in a lot of cases you probably come out on a plus side where sustainability is contributing back to the business in a meaningful fashion. [09:08] 

Neil: Do you have any examples of that, any success story that you could share? Because I think a lot of, a lot of product managers that we've spoken with, they're in the process of getting to that final result, winning the gold medal for creating a successful story. And there are not so many, right? There are few. But it's always an inspiration to see if someone has actually done it and made a success out of it. [11:24] 

Jeffrey: We started a program and this was at least a decade ago, in very early days, and it still continues to this day because of the business case that surrounded it. We have a reengineering program, so we look at our products and we look and say, could we do a synthesis, could we do a manufacturing process differently? Because when you look at that backend of it and you can take a product like beta amylase. So, beta amylase is a specialty biochemical that uses sweet potato as its raw material. We were able to change the manufacturing process of that material and eliminate two thirds of the raw material. So, we used to use 6000 pounds of sweet potatoes. We now use 2000 pounds of sweet potatoes. We used to use around 1800 gallons of acetone in the manufacturing process. It's now an aqueous based process. So we eliminated that as well. And then we eliminated the need for increased energy or electricity to raise the temperature and the pressure to make the reaction occur. So, because of this, there's definitely savings and time savings on the manufacturing side that we bring to that. And as I said, 300,000 products. So this is, you know, relatively small if you look at it, it's not a huge product, but still it provides benefit back to the business. It opens up manufacturing capacity because it doesn't take as long. All of those things have benefit, but those are the quantifications we put around them to showcase, hey, here's how we're doing this differently and by the way, here's the sustainability benefit as well, because you've eliminated this, you've made that aspect more efficient. Oh, by the way, I forgot to say the product is actually 15% more pure than it was before, so it's even a better product. I don't just have that one example. We've got a lot of these and I have a complete belief that pretty much anything is possible if we put our minds to it and look at these things in different fashions. And I think that's just a great example that we use kind of time and again. But we're coming across things left, right and center about these types of things that they're remarkable stories and that gives me a lot of great fodder to be able to share. [11:46] 

Neil: Are these all serendipitous innovations or has this been integrated int the stage gate process that you typically see in manufacturing companies? [13:55] 

Jeffrey: There are certain things that are serendipitous. And I think when we started off early on, and it's kind of like I said, you work with anyone who will work with you. At that point, definitely more serendipity. And now we're getting to the point where we've gone from serendipity to systematic and we're just kind of working our way through, and that reengineering process that I mentioned is something that we're now working at how we institutionalize. That one is less process driven because once the product moves from R&D into the manufacturing systems, it's a whole different world. Certain aspects of that are not as systematic as like the R&D process because then at that point it's kind of you just manufacturing a product. We don't have a system to go back and say every four years or every five years, we're going to go back and look at these processes to say, has technology changed? Because we just have so many of those manufacturing processes, it would be a little unwieldy. But I think that's the thing, is the serendipity educates me. The education for me gives me then hints of the clues of the directions to go and what to push for. And so not just me, but the team as a whole, we've got about 40 people that are working on this, but we've become really attuned to taking those cues and those messages and then figuring out is it stable, is it relevant, is it repeatable? And if it is, then we take those and figure out how do we push them into the business to then scale and expand it so that we can make it systematic. [14:05] 

Jim: I want to follow up on a comment you made a second ago, Jeffrey. The regulatory will just take care of itself and then we're going to deal with customers and competitive advantage. And right now, out of the EU and the US and others, there's a lot of new regulatory requirements that are on companies related to products. And I go back in my career, the regulatory was the first thing that needed to be done. It wasn't the ultimate positioning in a sustainability perspective, but it was a minimum that would be an expectation. [15:31] 

Neil: You don't get a medal if you don't kill people. [16:03] 

Jim: I strongly believe regulatory - it's going to happen. But the real competitive advantage is going to be in the market. It's going to be in your product sustainability from a business value, business case perspective. Is that the culture of Merck? That the regulatory is going to happen and we got teams in place to make sure that happens. And your role is really to take it and the people you deal with to take it to that competitive advantage to dealing with customer. Is that a correct interpretation? [16:07] 

Jeffrey: Yeah, Jim, you're absolutely correct. We have a really remarkable regulatory team. Got an amazing colleague who sits in Germany and his team do such a good job and it's tough. Let's not kid ourselves. It is tough when you're looking at the volume of products and of course the regulatory spread across different markets. It's not that we’re dealing with a consistent set of information and that makes this tougher. But you know, my joke about that is he and his team have the really tough job because they're the people that are telling you no all the time and they're doing it to protect the business. It's the right thing and that's what we've got to do, and thank goodness we've got such a remarkable and strong team doing that. I get to come in with the rainbows and the sprinkles and the confetti cannons and do the fun stuff of going from here and up. But I think we're really trying to work together even more effectively to pair those elements together so we've got an even better and more attuned view on where regulatory is going, where are people driving? And it's an ever-shifting shaping environment. But then when we're able to say, okay, we're going to try to look at something very specific and if you look at maybe Reach regulations and material restrictions or phase outs, how do we solve for and then use that requirement of what we know regulatory, what those restrictions are looking at, so that when we design or bring new materials, we're looking at a broader set of information and data. Because what we absolutely do not want and want to do is have a regrettable substitution and think oh, we solved it. And this is an ever-evolving data cycle. New data is always coming out and things that have been around for so many for so long, that risk always is there. And so we try to be mindful to think about those types of frames and what people are looking at and all the different things to then guide the decisions we make about the investments to understand so we don't get ourselves in a situation 20 years from now where we're digging out of a hole that we created. It's not going to be perfect. I think there's always going to be an issue with something that we make as humans. But for us it's really thinking about how do we have a stronger set of kind of commitment from us as a business to do what's good for people and make people centered choices that don't put people at risk in the future. [16:40] 

Neil: This approach kind of jives really well. You take an approach that is beyond regulation because regulation is based on what we knew, what we found out until now. Twenty years from now, I think that's the average lifetime of your product. It could be as long as 20 years that a product is on the shelf and changing that is extremely expensive to get residual and stuff like that. So by actually being better than what the minimum requirement is, you're actually defending that future potential, that future risk of a product not being viable to sell anymore. [18:56] 

Jeffrey: I think what you said, Neil, is really great because that's where I am. I'm the future forward looking part and I look in the rear-view mirror to learn lessons, to sponge up information, to understand what we did before and think about the ways that we do it different in the future. And I think that's one of the great things, but also the challenging things because usually when I show up on people's door, they're like, dang it, because they know different is coming. And you know, people don't like change as humans. We're not overly fond of it. But I think that's one of the great things about my skillset and one of the things I've learned about myself is I am at my best when I'm creating things. That's when you get the best out of me that has the most impact for our organization. And so that creation and ability, I would say our secret sauce, and certainly the secret sauce of mine is the combination of innovation and execution. Sometimes people may have a lot of innovative ideas, but they can't execute. Or they're really good at execution, but don't necessarily have the pipeline. I don't know what's smiling down on us, but I think that's where we really have been able to pull this together is we see this broad array of things and I think we have such an Interesting seat within the organization. We sit in strategy for the organization. So I report to our chief strategy and transformation officer. So that gives us broad access across the entirety of the business; we're not over here in one little corner. But because we have that broad access to the business we're seeing, I'm not going to say everything, but we see a lot of things. And by seeing a lot of things, you then understand the places you can plug in and where you can have an impact and effect. And when you got the support of your senior leaders to do what you do, and because we've established a track record, I think we've backed up what we said with facts and deliverables and outcomes, people are more willing to take the time to have the conversation to think about the ways that they can make changes, because the framing that we've put on it and the results that we've showed show that it's going to be additive to their business. And that's the powerful component is when you've got reasons and compelling examples of why change is going to be beneficial for them, it lowers the hurdle. Maybe not as much of the displeasure or discomfort with it, but it does lower the hurdle of people's willingness to go through that. [19:32] 

Neil: To build on that, you mentioned innovation and execution and the balance of both, I think R&D is innovation, so that's always happening. But the focus on execution, are there things that you've learned from all the struggles and probably successes that you've had that you could tell others to pay attention to, that will help them be successful with that second part of it - of the execution. [22:00] 

Jeffrey: My best takeaway from this and this, you can age me a little bit. But if you think back to the infographic craze of the late aughts and the early kind of teens of the 2000s, and so I have a bachelor's in journalism in advertising, so not exactly what you would think of as a person who leads sustainability for a science organization. But this is where I think my storytelling capability comes into play because the infographic gave me a way to tell a story, but to use numbers. There we go again, my discomfort with the numbers component, but used in an element that I'm more comfortable with is storytelling. So, pairing these two things together. But that helped build credibility because when I was able to have clear accountability and transparency and I was the person, I'll be honest, I was hell bent because I saw this happen in our organization of not being the flavour of the month. Because you heard about these things and then they would go away and then you'd hear about a new thing and it would go away, right? [22:25] 

Neil: All the time. All the time. [23:26] 

Jeffrey: But if you were coming back and reporting out what you did and the success that you had, you started to create accountability and then that created this reinforcing circle. And now literally, I guess at this point three weeks ago, we had our mid-year team meeting. Our team meets monthly as a group globally and we went through our half year update on our commitments that we had set out at the beginning of the year. And literally it was an hour and ten minutes of our teams going through each section, had one to two slides on it. That slide had the commitments that we committed to. It's all numbers, of course, with the story below it of how we're doing these different things. But the sheer volume of tracking that we have, and I don't mean like useless weigh you down tracking, but the key indicators that drive us to say are we setting out and achieving the objective that we have? I think that speaks to what we have done in a way that people see that we're very clear and transparent about how we're progressing and that gives other people a sense of accountability to the numbers. When you give people that shared collective accountability, it's transformative. It gives people a sense of they're contributing to something bigger. This isn't just 40 people driving sustainability. I think our goal this year is like 404 new products coming out of our design for sustainability system. And there's seven kind of business segments underneath our business units that contribute to this. But I think that's really where we succeed is it's not a command control, but it is just an awareness that gets people to say I'm committed to that, I'm contributing to that and I help make that happen. Our credibility is really helped significantly by that. [23:28] 

Jim: Jeffrey, when you think about all those successes and sounds like advancements you're doing, what do you see as the biggest opportunity? Say you're beginning to do planning for 2025, where do you see your biggest opportunity for driving business value with sustainable product? [25:18] 

Jeffrey: Now, Jim, we're moving to this crossover of connection between having developed the products and commercializing the products. So now because we have such a broad array of products, it's hard for our commercial team members. They're not going in and selling a product. It's really our customers who are driving like, I need this, I need this, and they've got a laundry list. But what we're really trying to do is think about the tools that start to prioritize these types of products into our customers workflows. So, we're not just creating something and it is sitting on the shelf and like, well that was great, we created that but nobody's buying it or it's got slow uptake. We're now trying to push that into the portfolio for our commercial team members because we have a focus on new product introduction and a success metric on the uplift of sales of those products, and these products count as that. So you've got an additional incentive if they're aware of it. And so we're using tools that we've created to then start to - we have not done this yet, but we just had a call about this yesterday -was that they get notified when these new things come into the portfolio and the applications they can be used for. And oh by the way, your customer was purchasing either an old version or something that's similar. So this could be a replacement for that. So you know exactly where to go, who to talk to to start, then making the switch or the conversion. So I think that's really one of the big focuses is now that we've got the portfolio shift happening – not done, but it's moving now - we have to move to the next stage of how do you move it from the ideation creation to moving it off the shelves, and into users laps. [25:37] 

Neil: At scale, right? Because you mentioned that typically you have your customer asking for certain things and then you give it to them. But then the question is what about the others? [27:15] 

Shelley: I'd like to go back to this intersection where you were talking about how you're thinking about the future. And I want to look at the teams that were involved, particularly in those successful stories you shared with us about their sustainability journey. So the R&D teams, the product managers, what do you see the evolution being for what they are thinking about? What kind of questions are they asking themselves about in terms of addressing sustainability? [27:24] 

Jeffrey: Yeah, Shelley, we look at the progression. The start was why do I have to do this? Why? And you're like, okay, fine, fair. We get some of those people through that and then the how. And as we go through the how you're talking about, we've kind of grouped our approach into seven different categories and that can be things like materials, suppliers, energy, a variety of topics and those things then are… the system has 47 criteria that it quantitatively assesses on. So bless everyone who has to get involved with it. But then that starts to shine the light on the big issue. And this is, I think where we continue to evolve is the data. What's the data related to this? That is going to help them make quicker decisions. And so this is what we're trying to work. I think we all know data within the practice of sustainability is tough because you're looking and it's evolving and you're getting more specific information and ideally you think about a business like ours, we started at a spend based assessment, we're moving to weight based and hopefully moving deeper into primary. But the likelihood of us getting primary data from all 30,000 suppliers is kind of not realistic, let's be honest. But that becomes this key element to help give a sliver of certainty for the R&D scientist because that is really what they're looking for, is to have the information that helps them make a more informed decision, that helps them feel confident in the work that they're doing. So I would say that's the progression: is you started with why do I have to do this? You move into like understanding the basics and then you get them the data. And I think this next phase is really where it gets fun and interesting, once we get past that more data coming into the system then you really get to opportunities where you're unlocking more transformative opportunities where people are just thinking differently because they're not questioning, have I made the right decisions? Do I have all the information? I think as a company who works in science have a huge bias to wanting perfect information. I long ago let go of working with perfect information. I'm not trying for it anymore but I appreciate those people who are still, that's where they are. It is a precise thing that we do. But that element of getting more data so they can make different and feel more informed about the decisions really gets us to that next phase. So I look at that once again, future looking. But I look at that future of what I think is yet to come and like I say it often, but buckle up, it's about to get even more fun. [27:47] 

Neil: When we said what is the secret to success? And I think you missed this one part which I noticed now, it is the optimism that you exude in such conversations. It draws people. I love that. It's very often in the field of sustainability, experts have this doom and gloom. I've seen this so often. It's like, oh, nothing is changing and it's not changing fast enough. I think this optimism is what motivates people, not pessimism. So I think that's super important. [30:28] 

Jeffrey: I appreciate that because I think one of the things, and I'm talking with our customers, I'm talking with our teams all the time and I think one of the things that comes through, and I appreciate the feedback because it's also kind of like, am I doing my job? Which is if I hear the feedback about being passionate about the topic, great, because I am. I wouldn't necessarily have ever said, oh, I'm an environmentalist. I wouldn't have claimed that for myself. But I also really believe it's important. But I also see the role that we play and I think it may be harder for some people who are working in sustainability in areas where you're trying to sell people more of something that we don't necessarily need. I look at what we do and it is really important to think about the ways that we can eliminate substances that shouldn't be into things. But the here and now about, about treatments and therapies for people who are struggling with diseases and illnesses. We contribute to making that better. And so I have the uplift of working at a place where I know we're contributing to hopefully the betterment of society. But I also am working at a place where I have got an impact on the future and certainly on something that's much broader than I would have ever had individually, which is fantastic. [30:56] 

Shelley: Well, you certainly conveyed the entrepreneurial opportunity and optimism that sustainability brings. Jeffrey, final thought to you. The last thought you'd like to leave our listeners with today. [32:12] 

Jeffrey: I think one of the things that is just constantly on my mind and I think, Neil, what you just said about the positivity, I often find that we limit ourselves. And I think that final thought is we are all capable way more than we think. And it is so easy for us to take you the negativity around us, the kind of depressing sights and sounds and news and all the things, and it can weigh you down really quickly. But one of the things that I really try to think about is a reminder and our team going back to that half yearly kind-of-review. It takes a while in our system for people to recognize that when we set these commitments they're not hard and fast, right? Like, they are not set in stone. And it's not like if you don't achieve them, we're going to punish you. That's not how we work. We set really ambitious, bold, probably unrealistic goals, and more often than not, we're achieving them. It's not by having a culture that works you to the bone, because I don't believe in that, but it is once again, just believing that we are capable of driving a lot more than what we think. [32:22] 

Jim: Well said. Thank you. 

Neil: Amazing. Thank you. I feel so energized. I'm going to go run through a wall right now. 

Shelley: Great final thought. We're all more capable than we think. Thanks, Jeffrey.  [33:43] 

Links to Things We talk about 

• MilliporeSigma - https://www.sigmaaldrich.com/  

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At HowGood, Ethan's focus is on driving product sustainability and business model innovation for Fortune 500 Retail and CPG companies. HowGood is an independent research company and SaaS data platform with the world's largest database on food product sustainability.

In this Episode 

Shelley: This is the first time we've had a guest from a technology company on the podcast. Could you tell us a bit about what HowGood is and who it serves? [00:33] 

Ethan: HowGood, as you mentioned, has the world's largest database on food, product and ingredient sustainability. We're a non-traditional startup in that we're 17 years old right now. So, we've really spent the better part of two decades building out a massive picture of what global supply chains look like and what are the impacts that happen in three key areas: carbon, nature and human rights. From that massive amount of data that we've gathered for 33,000 ingredients, we've built up the capability to, automatically, using AI, calculate the impact of any food ingredient or product in the world. We've built it all into a software platform that is, I think, fun and easy to use and we have six of the ten largest food companies in the world using the platform to understand their impacts and to automate reduction strategies. We have major retailers around the world, from Ahold Delhaize in the USA to Carrefour in the Middle East, and we even have ingredient suppliers like Ingredion and the Kerry Group, who use the platform to understand their impacts and communicate downstream to their consumers. So overall, you can think of HowGood as a social network for impact data on food and agriculture. It’s the place where the industry comes together, whether you're a formulator or a procurement specialist, or someone in marketing and sales or a sustainability team needing to do reporting; everyone comes to us for a single source of sustainability data truth, so that they can coordinate, collaborate, network, engage with suppliers to transform the impacts of their products. [00:41] 

Shelley: Thinking about the broader picture, you're bringing all these groups together, what do you think the role technology does play? Because it sounds like you're playing a role already, but what role do you think it plays for these food formulators and food companies? And what is it doing for them to achieve sustainability? [02:27] 

Ethan: I'll just tell a little story that is part of how we got to where we're at now to answer that question. This was a number of years ago in San Francisco, it was at a co-lab, a sort of weeklong sprint event and I met somebody from Danone who said, look, I have 1000 product formulators globally at Danone and every day they are innovating and they are renovating new yogurts, new plant based beverages and those people, many of them really care about sustainability, but many of them weren't trained in it. They are food scientists. They are formulators. They are making delicious, beautiful food. But they don't necessarily have the information and the data to create a circular food product or create a regenerative food product. They have a desire to and more and more, we're being asked from a corporate level to improve or to make every new renovation have a lower carbon footprint or even to know the carbon footprint of our products. But I can't send every single one of these formulators through a master's or a PhD in sustainability. How can we help them more quickly? And I said, well, I think we have all the data for that, so if we could use technology to put it at their fingertips, even before going to the bench, that should be able to speed everything up. That was the inception. That was the idea that launched lattice, which is the HowGood software platform, basically to use technology to put the data at everybody's fingertips, in the same way that you would look at the different physical qualities, the different taste qualities of an individual ingredient, the same way you might think about, well, what's the price differential going to be if I swap from this one to that one? Just like, you know, and have information on those factors, we thought, let's just put the carbon footprint, the water footprint, the biodiversity impact, the labor risk, the processing energy use, the animal welfare. Let's just have clear quantitative data in that format right at formulators fingertips. Because I think formulators are at a very potent and powerful place to change the food system, much more so than I think are often given credit to them. What formulators do and how they create products is such a huge, potent spot to change upstream impacts because of where impacts actually come from, which I think we'll talk a bit more about as we go. [02:41] 

Neil: I think you've mentioned two very interesting words. One was circular food products and regenerative food products. Could you tell us what those mean? [05:09] 

Ethan: If you look at the definition of a circular economy, most of the time for food, they’re pointing to regenerative and regenerative agriculture as one of the main routes to create a circular economy of food. There are aspects of design, there are aspects of packaging, but really most impacts in food happen not in the manufacturing plant, not in the packaging, not in the transportation, but they happen upstream, they happen where food is grown and that's where regenerative agriculture plays a huge role. So, to focus on regeneration, the key concept there is for a long time, at least 100 years, probably 1000, but really the last hundred years, the production of food has had a massive negative impact on the world. Emitted lots of carbon, destroyed soil, deforested landscape, killed different species, poisoned people, poisoned waterways, and in many ways still does. It still does have those deleterious effects. We still have a dead zone in the Gulf of Mexico. We still have significant loss of species. Food emits 33% of the carbon emissions in the world, the greenhouse gas emissions, but it's responsible for a much larger percentage, like 80% of all freshwater use and a huge percent of the biodiversity loss that's happening is from food and agriculture. So that's, you could call business as usual agriculture or degenerative agriculture. And that's most of what's out there. [05:19] 

Ethan: So, there's been some good focus in the last two decades to try to move away from that and towards a sustainable agriculture. A sustainable agriculture would be kind of like a net zero impact, but really, who just wants to sustain? If somebody asks you about your relationship with your sweetheart or your spouse, and they said, how's the relationship? And you said, it's sustainable, is that really what we're going for? Or if you're on your deathbed and somebody says, what impact did you have in this world, in your life? And you said about net zero. That's not really enough, and regeneration steps beyond that. The idea with regeneration is we go to net positive. We're not just doing no harm, we're uplifting people who are growing food, we're enhancing biodiversity, we're capturing carbon in the soil and fighting against climate change. Regeneration generates new potential and doesn't just get us to sort of like a midpoint of sustainability. It's actually possible in food in a way that it isn't in other industries. So, like transportation or buildings, you can reduce harm, you can reduce impact, you can get towards like a zero point, but it's really hard to do positive. Somehow, you got to build the vehicle and drive it around or build the ship and sail it around. You can get to zero, but you can't quite get positive. Food and agriculture is this incredible opportunity where you can do good, you can add more carbon to the soil than you take out, you can have more life in a place, you can have richer, more delicious recipes and meals and food products coming up than was there before. You can heal degraded land while growing food. So that's why I focus on regeneration. That's why HowGood says, let's set spectrums where you can track your progress towards that regenerative impact in the world. [06:47] 

Neil: Is there a framework you have for what are the different aspects of regenerative food production and kind of recipes, so to speak? Imagine people who are creating both: The ones who are growing food, I think, is one aspect, but the ones who are using them in recipes, what should they be looking for as indicators for what a regenerative food ingredient would be like? [08:40] 

Ethan: You asked two questions there; both are really good questions. One is like, is there a framework or playbook to work with to get you there? And to that I would say, yes. I've written a couple papers that will lay out sort of a big picture framework of how to think about and move from degeneration to regeneration. And then in terms of food product creation, one of the places that popped to mind when you said framework is I did a webinar earlier this year on artificial intelligence on AI for food, and in that I followed the course of a food product right from the ideation phase, through piloting, prototyping, through the scale up, through the procurement that's needed all the way to the end, the marketing. And in that case, I was talking about, here's the artificial intelligence tools you could use at each of those steps. But really what I was going towards is how do you transform the food system through each one of those individual steps? And so ill just say that webinar is freely available; we can put it in the show notes, so you can sort of see that particular framework, which is like basically how to use AI to regenerate food production from a formulator's point of view. But then it gets to your second question of what’s the indicator of a regenerative ingredient? Which is such a cool question. And the first thing I would say is there is not a lot out there. Its not like 10% of the proverbial formulator’s supermarket shelf or of the materials you can procure from many of your suppliers, its not even 1% of global supply of food ingredients that I would say are achieving a regenerative impact. There are some out there. There are some certifications you can look to of varying levels of depth. There's a regenerative organic certification, there's a certification for animal products that's called land to market. Those are great to look for, but certifications alone aren't going to be sufficient because there's just, again, there's not enough supply in any which way or form, especially to of just switch to a regenerative product. So really what it means to find a regenerative ingredient is you actually have to think beyond the way that you currently think about just finding the ingredient that solves your problem. Instead, you have to start looking at and collaborating with your whole company internally, and then a whole network externally. You are going to have to help generate the supply of regenerative ingredients for the types of products that you are working with. And that takes a broader collaboration, but it takes a more fun, creative thinking that I think formulators have, but maybe haven't always been empowered with data to do. So, the path to find regenerative ingredients is you must help generate regenerative ingredients out in the world through broader cooperation. [09:03] 

Jim: Ethan, is there collaboration? I mean, do folks in that regenerative supply chain, they say, let's get together in a precompetitive space and collaborate and come up with solutions that drive a more net positive regeneration system? Do those kinds of things exist? [12:07] 

Ethan: I pick out one thing you just said that I think is cool and important. You said regenerative supply chain, and then a little later, regenerative system. There is no such thing as a regenerative supply chain. In fact, there's no such thing as supply chains in general. We use the term supply chain because we think like machines, and we think everything is a machine around us. We say, we're hardwired to do this or hardwired to do that. Humans don't have wires. We're not computers, we're not machines and nature doesn't have any chains in it. There are webs, there are networks, there are systems. But part of the reason that we still say supply chain, and this is difficult in a lot of ways to hear, is because we used to chain people up in order to produce the goods that created our products. And so, there's still this mechanistic (from the chain) and colonial concept that we are pulling things with the chain up from supply. And even though you didn't mean any of that when you said it, and nobody does when they say supply chain, we are unconsciously creating and keeping that chain intact, which is going to make it hard to regenerate. [12:26] 

Neil: But could you explain why? For me, a supply chain is a sequence of steps that get to an outcome. That's why you call it a chain of events. And of course, you could have many supply chains that are sort of a web, actually. It's almost like a fishbone diagram; different parts that come together to get to where you want to get to. But why do you say that thinking in terms of supply chains is what is holding us back from thinking about regenerative products? [13:43] 

Ethan: I mean, you just said part of it, which is oh wait, it's not a chain, it's a web. And that is a more accurate representation of how supply systems are. It is a complex, interconnected network that has many nodes that all are communicating and talking to each other in the context of a market and prices. It is a network, and if we just treat it as a chain, if we think of it as a chain, we tend to oversimplify. We tend to think one to one connections: I buy from this person, who buys from this person, who buys from this person, and that makes it harder to do that pre competitive collaboration that Jim was talking about, where it's not just about how do I chain up and get my farmers to grow in a certain way. We need to collaborate in the supply shed in the region where all of those growers are growing and help them as a whole enhance and transform their agricultural practices, because then we can lift everybody up, and many companies are going to source from that, and many farmers are going to benefit from it, and many community members benefit from it. And that all happens in a network, not as a one to one-to-one connection. [14:10] 

Ethan: So yes, there are many great precompetitive collaborations out there. One is called the Sustainable Markets Initiative; this is one that HowGood is part of. You can see a couple of great reports we put out for COP over the last few years on scaling regenerative farming. Another is the WBCSD, the World Business Council for Sustainable Development, which especially recently at COP 28 in Dubai, I got to be there as they launched the Action Agenda for regenerative landscapes which is something that was put forward by the UAE presidency in collaboration with WBCSD and set targets for the many millions of acres that were going to go into regenerative agriculture. We also see some really great work coming out of the One Planet business for Biodiversity Coalition, as well as some good thinking recently on financing the transition from the Rockefeller foundation. So there’s a bunch happening and we need more. We have leading companies who are part of it. We have got Danone, we have Unilever, we have Nestle, we have General Mills all stepping up and pushing it forward. But we need every company, we need every brand. It’s got to be a massive collaboration on a scale that we have not seen before and it also has to go outside of just the brands and manufacturers. It has to be the ingredient suppliers. We need the ABCDs, we need the traders on board, and some of them are stepping in this direction. We also need the banks. We also need government support. So, we basically need a big, blended network of coordinated action if we're going to move anything close to fast enough to prevent the really rugged stuff coming from climate change. [15:18] 

Jim: I know a lot of the greener products is that the purchaser, the big company who designs a product but also who purchases it like a Walmart or in the US, the US Government, is going to be buying sustainable products and that drives the whole market; and you mentioned that just a minute ago. But we have found in the EU and North America, there's the government making decision to buy greener products. So, if the government makes a decision to buy regenerative foods, that would be a pull for all these brands to do more. Do you see that as a path forward? [16:55] 

Ethan: Yes, I definitely see that. I would love government procurement to specify in the United States they should go with what the USDA calls movement in this direction, which is climate smart commodities or climate smart agriculture. I actually don’t care too much what it’s called but that would be a huge step if the government would say we’re only going to buy food that come out of our climate smart commodities program. The US Government just put $2 billion into innovation at the farm level to be moving more in this direction. That's important. I don't think it's as important as the first thing you said, which is the retailers, and not just Walmart but what all of the retailers choose to do. And I think we're starting to see it. There are some really interesting collaborations, for example, Ahold Delhaize USA has a collaboration they're doing now with Kellanova, with a very iconic product of theirs, and really engaging a full supply system, right down to the individual growers, up through the mills, the manufacturing, right into the stores and the storytelling. [17:31] 

Ethan: In my role as chief innovation officer, I both geek out in regenerative agriculture, the realm that we're in right now, and on product design and data. But then I also help manage our presence and collaboration with these global coalitions we're talking about - that also means at events like the climate COP or the biodiversity COP in Colombia, we're going to, or at climate week in New York coming up at the end of September. We have a house, a sort of a venue, it's called Regen House. You won't be surprised hearing that from me now. So, Regen House is in New York City in Climate Week, and one of the evening sessions we're going to do is really focused on this iconic product from Kellanova, but it's in collaboration with the retailer to kind of tell the story and really make the full supply system visible and present so we can see how that collaboration is necessary to move us forward. When retailers head in this direction, that creates a massive mark. [18:41]. 

Neil: Absolutely, absolutely. I think there's two ways to look at this. One is you regulate to create a minimum criteria that everybody needs to follow: Don't pollute water, don't put poison into the soil. So you create a regulation around that and so there's some things you can do there. But I think the bigger power is, at least outside of the food industry, it's in differentiating, it's how do I position my product as being better than others? And in this context, you said there's not so many certifications out there. If you look at other products, there's tons. I think in Europe there was a survey that was done - 500 certifications or labels that you have out here. What is in it for the product manager to look at regenerative ingredients in their product? What is needed for them to pay more attention to it? Or, I think that's a wrong. Two different questions; I think what is needed? I think there's a different thing. Ideally, customers loving it, but customers don't even know what regenerative products mean. So how do you solve that problem? [19:38] 

Ethan: I don't think we have to only have regenerative product. Regenerative products are great. It's an idea. We should strive for it. It's fun. We want to go in that direction, for sure. But it's not the only path and it's more like the guiding star to head towards and along the way, there's a lot of great things we can find. So, I agree, there's too many certifications out there. They're all well intentioned, many of them have great value to them, and many of them now do show an uptick in sales. If you have a certified organic product, that's still a very quickly growing category. But I think part of what's happening from the consumer perspective and the retail perspective is it's a little much, 500 different certifications to pay attention to and know what they all mean and know how to differentiate between. You know, if you're in the egg aisle: cage free, free range, organic, non GMO, pasture…; it's a lot to figure out. [20:35] 

Ethan: So HowGood has for a long time been a proponent of a simpler, more unified, very holistic system that takes into account all of environmental and social impacts but simplifies it down to something that's much quicker to understand. You could put this in the realm of eco labeling, whereas opposed to many different certifications, there's one unified system that happens throughout an entire grocery store. Europe is taking some strides in this, but actually in the US, a number of retailers, like Ahold Delhaize who I've mentioned a few times, they have taken the lead and they have used a system that Haugen developed that is very simple. For products it says good, great and best just for the top 25% or top 15% or top 5% of products that are out there. That's a combined impact of carbon, water, biodiversity, labour risk, animal welfare – a very holistic look. But it simplifies it to something that I'm looking at six cheddar cheeses, one of them says, “great”, I'm gonna grab that one. Or we also have some little attributes, some labels that are very simple. They say, ‘climate friendly’, or they say ‘water smart’, really simple things. And wherever we've done trials with these and done good, hard science against controls, putting simple, clear, unified communication across the whole store lifts sales. And this is going to your question, Neil, of why should a product manager pay attention to this? Why should they care? Sustainability sells. More sustainable products, products that are further towards regeneration, products that have an attribute that says climate friendly on them - they'll jump in sales. We did a trial in the UK - this is published, there's a press release out there about this - sales jumped 25% to 45% for these different attributes. [21:27] 

Neil: Hey, the fastest growing sector of all in Germany right now is organic food. And this is organic food. Nobody knows what that means, but it's organic. And there's organic stores all over the place. It's growing faster than any other commodity out here. [23:15] 

 
Ethan: And NYU and the sustainability index that they do... 

 
Neil: Yeah, the Stern school, right?  

 
Ethan: That shows 3X category growth, Nielsen, something similar, and showed the same growth. So why should managers care? Forget about regeneration. Do you want to make more money? Would you like a better top line revenue? Cool. This is the way to go. This is what millennials want. This is what Gen Z wants.  

Neil: And 70% of buyers in ten years are going to be those guys. 

Ethan: And then Gen A, right? I got to go to the IFT conference recently, which was really excellent - the Institute of Food Technologists, where maybe many of your listeners were - and I heard a panel there on Gen A, who's coming up, and they really care about sustainability even more. Forget all the things about climate change and uplifting species, just think about the money, and we're going to be heading in a good direction here. [23:59] 

Jim: We've been talking about the upstream, but when I hear a podcast or some news, all I hear about is food waste. Food waste a major problem. Where does that fall in this spectrum of sustainable food? [24:26] 

Ethan: I don't know. I'm sometimes controversial in this realm. I think that some of the downstream things like packaging and food waste, they're a bit of a red herring in terms of where many in the food industry can have potent impact. We should prioritize our efforts and we should allocate resources to change based on the percent of impact that something has in a product's life. So packaging: 3 to 7% of the impact usually comes from packaging. That's about the amount of time, attention, and resources, if we're trying to make a sustainable product, that we should put into packaging. Food loss and waste in the design of a product and a product life cycle, it's not usually that significant. [24:46] 

Neil: No, no, but that's downstream, right? So, there's a statistic that says 70% of food that is produced never gets eaten. That's a pretty big number. So, farm to fork waste. I think that's what Jim mentions. Is there something in terms of product design that allows one to consider this and minimize this? [25:38] 

Ethan: Not really. From a formulator's point of view, that's not where you have the power to make change. Like you can use upcycled ingredients. Sure, upcycled ingredients are great. Take what would otherwise be a waste stream and turn them into something. Yes, useful, good thing to do, no problem there. But using a bit of an upcycled ingredient is meaningless if what you also have in your product is palm oil and cocoa. That's where the impact is. 90% of the impact of any food product is in the ingredients and it's at the growing and production of the ingredients. The fastest thing you can do is change ingredients, or change sourcing locations, or change ingredient suppliers, or change some of the practices of how the food is grown. Those are the biggest levers, and many of those are in the hands of formulators. Switching from palm oil to some other vegetable oils can have a significant positive impact. Switching the location that the palm oil is coming from or the certifications that are with it, you can have a significant impact. There are many colors in the palette of how do you improve the impact of a product. But we should not go with the thing we hear about most or the thing that is marketed the most. We should go based on real hard data of where the impact is in our products. And that's the way to figure out, where do I focus my creativity as a formulator and how do I make this product better? There are some products. If you have a bottled water, packaging is important because water doesn't have a big footprint, so the packaging is really important. If you're making bottled waters or essence waters or anything like that. Yeah. Pay more attention to packaging because there it's 30% to 40% of your impact. But for pretty much all other categories, your biggest bang for your buck is not going to be in the packaging or it's not going to be in trying to solve food waste. [25:58] 

Jim: I think that's the point. When I go back, early on in product sustainability, there was a producer responsibility and product responsibility. There was a big debate. Europe had more of a producer responsibility. The US was more of a product responsibility. But I think it's evolved towards the producer responsibility; producer has responsibility, not only through design, but all the way through the entire lifecycle. I think what you're arguing here is that from a formulator, it's really the product. I've got responsibility there, but it's a shared responsibility with others, and I think that's part of the conversation. This goes back to collaboration on the regeneration, but there's also collaboration and partnership on the food waste and the use and end of life of that product. Of the food, in this case. [27:47] 

Ethan: Exactly. I don't want to denigrate all the incredible work that's happening on food waste, and I don't want to say it's not important. But I do want to say that for a product formulator, it might not be the place to focus all your energy and effort and to your point, yes, let's collaborate with the larger ecosystem to make some motion on that also. Another thing to kind of speak to this food loss and wasting is I'm a farmer. I have a 30-acre apple orchard, do grass fed sheep and lamb grazing in a kind of agroforestry silvopasture way underneath the apple trees we have shiitake mushrooms. Our farm has multiple other farmers growing vegetables between rows of chestnut trees. They're raising chickens that are rotating through and fertilizing the soil. We have a small integrated, hoping for aiming towards regenerative agriculture farm. Food waste happens on farms. Food waste isn't all evil. Yes, there's food that gets produced that does not get eaten on a farm. You know what happens to it? It feeds the chickens or goes into the compost and that feeds the soil for the next year. So, it's like there's a certain degree to which food waste has been vilified. It puts the problem somewhere else, in somebody else's hands instead of grasping changes, big changes that we can make ourselves with what's right in front of us. [28:36] 

Neil: Except for one thing that food formulators could keep in mind - this idea of best before versus used by, which is about the longevity. So how long can you preserve the food product on the shelf? And this has to do with what ingredients you put in there, how you package it, because there's certain packaging that will actually... I mean, we had this huge thing in Germany, where we used to package cucumber. Every cucumber packaged in plastic. And so we had this huge movement that says, hey, we do not want plastic and that same cucumber, instead of lasting for seven to eight days on the shelf, now lasts two days. This is where I think you may do the best, and I think this is not an ingredient, this is not a food product per se, but it's the same thing with biscuits and bread and stuff like that, where by thinking about how you package, thinking about packaging itself may not be the most significant impact, but it can influence how much of your food overall actually gets wasted at the end. So, I think that is a thing that I worked on, I think probably 15 years ago when we were doing work with some of the big retailers and looking at where is the biggest bang for the buck. And yes, one of them is ingredients, and I think the other is in reducing the amount that actually falls out of this supply web, as you call it. [29:59] 

Ethan: Yeah, I think it's interesting, and then also to speak to this point of collaboration we've been hitting on: another realm that helps with that cucumber that only lasts two days, this brings it back to regenerative agriculture. We're farming in a more regenerative way, and there's a higher nutrient density in the foods, which is like, this is a big unlock for the food industry. Like regenerative farming actually produces food that is healthier, that is more nutritious, that has some of the nutrients back in the vegetables and the fruits and the wheat that has degraded over the last 50 years. That will also lead to helping your vegetables last longer. My cucumbers don't last for two days, they last for two weeks, sitting out because of the richness of the soil and what they're coming out of. So, we can do both and what you're saying definitely makes sense in our situations when you look at the data where that packaging is really important. And I think the whole idea here is that we're looking for a polyculture of solutions instead of a monoculture. In agriculture, there's only one thing growing, it's just corn or it's just soy, it's just cucumbers. Whatever it is, that's a monoculture which brings in all of these challenges. It's that same monoculture mind that we were talking about with the chain, where there's just one to one to one. Instead of a monoculture, we need a polyculture of solutions, all working in a coordinated way together. [31:24] 

Neil: Great. 

Jim: I like that a lot. One we haven't talked about is social - the workers and child labour and slave labour. I'm assuming that's part of the ecosystem of food sustainability. 

Ethan: Yeah, it's part of the ecosocial system. It's a big part of what HowGood looks at and thinks about, and there is the danger sometimes if you're only looking at carbon footprint or you're only looking at water, you get that single topic tunnel vision. There is then the possibility of unintended consequences and doing more harm just focusing on greenhouse gas emissions or carbon. This is part of why HowGood has always from the beginning built into its system, the ability to track carbon right alongside human rights and labour risk, right alongside animal welfare. We think this is really essential. We think it's one of the gaps. You see a lot of stuff out there that's like a carbon management platform or carbon accounting, which are good. Don't get me wrong. I like all of them. I want more and more of them. But if you're using AI to just focus on a particular thing that's carbon, you get this thing where you can over optimize. Just like if you over optimize for price, then you're going to hit all of the environmental, social aspects. If you over optimize for carbon, you might leave out the labour risk. This is a really important thing that we pay attention to and track in the database and want available to everybody. It's also even more difficult than agriculture thing to work on and to create positive change in. But it's really worth looking at, understanding and making choices on and towards labour situations that uplift people as opposed to oppress them. [32:57] 

Jim: Yeah, I think that's right. I mean, if you really highlighted the importance of taking a life cycle approach, multiple impacts, not just single impacts. So, I fully support that. [34:23] 

Shelley: Ethan, as we come to a close on this, what's a final thought to leave our listeners with? [34:35] 

Ethan: It's so fun to work in here, right? You can tell in this conversation we're having there is great purpose in moving positively for the world instead of a single bottom line focus. Here I go again, monoculture to polyculture. We shouldn't just be focusing on that single thing even in our own careers and I find formulators to be so creative. You’re designers. Your listeners, really design the future of what we're going to eat. And so there's a huge amount of power in your hands. Can't be done alone, again, you got to collaborate to do it. But let's go, get access to some good data and make your products better. Go find and make some regenerative ingredients. And I'd be happy and honored to be with you and have our data with you and just come think and play with you on it as much as I can along the way. [34:41] 

Links to Things We talk about 

• HowGood - https://www.howgood.com/  

• Regenerative Agriculture Continuum by Ethan Soloviev - https://medium.com/@ethansoloviev/regenerative-agriculture-continuum-4346f78dde3e  

• How Technology is Transforming Food Sustainability: Data and Metrics as a Path for Transformation - https://www.howgood.com/blog/technology-transforming-food-sustainability  

• Land to Market Certification- https://www.landtomarket.com/  

• Sustainable Markets Initiative - https://www.sustainable-markets.org/  

• HowGood Announces its Climate Impact Labels will be Displayed on Food Products at COP28 - https://www.howgood.com/blog/cop28-climate-impact-labels#:~:text=Stone%20Ridge%2C%20N.Y.%2C%20November%2028,at%20COP28%20in%20order%20to  

• COP28 Action Agenda on Regenerative Landscapes: accelerating the transition - https://archive.wbcsd.org/Programs/Food-and-Nature/Food-Land-Use/COP28-Action-Agenda-Regenerative-Landscapes-accelerating-the-transition  

• One Planet Business for Biodiversity - https://op2b.org/home/  

• World Business Council for Sustainable Development - https://www.wbcsd.org/ 

• Climate Week NYC - https://www.climateweeknyc.org/  

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The GEC is is a mission-driven nonprofit that leverages the power of purchasers to create a world where only sustainable technology is bought and sold. GEC manages the EPEAT ecolabel, a free resource for procurement professionals to identify and select more sustainable products. In addition, the EPEAT ecolabel is a resource for manufacturers to demonstrate that their products conform to the highest sustainability standards. Since its launch in 2006, procurement professionals have reported purchases of over 2.7 billion EPEAT products, generating cost savings exceeding $30 billion USD and a reduction of over 30 million metric tonnes of greenhouse gas emissions.

In this episode 

Shelley - With your deep experience with supply chain, I thought we could start with how product sustainability changes in a company that has a fully outsourced supply chain compared to one that might have a more vertically integrated supply chain. 

• Bob - That's a great question. The supply chains of multinational companies has evolved quite dramatically over the last few decades. Ones that were more vertically integrated and the manufacturing owned by, especially in the electronics field, by companies and brands that we know quite well in the late nineties into the early aughts [2000-2010], was outsourced both from an efficiency perspective, cost perspective, and that really led to a complete shift in terms of the leverage that companies have. [00:54]  

• That's been, I think, further changed by the supplier community beginning to evolve their capabilities as well, going from pure contract manufacturers where they were provided designs by the brands, into moving up that ladder from contract manufacturers into original design manufacturers. So, they actually own the designs in many cases and engage with the brands after the fact. And so that began to change both that leverage within the supply chain, but also very key components of business relationships, like who owns the intellectual property. It's completely changed how companies engage when it comes to specific standards, but in this case, social environmental responsibility standards specifically. [01:29]  

• And that really begins to affect this space in a couple of ways. One is when it comes to integrating social and environmental standards into product design and manufacturing, as well as the complete value chain. So, these specific standards are very complex and, in some cases, not only begin to affect the price of materials and logistics and shipping, things like that, but also the behavior and policies that a company might have in the supply chain. So that's one. And I think we'll talk a bit more about that as we get into the impact of regulations and voluntary standards as well. But the second area is really around when something runs afoul of social environmental responsibility standards, whether it be environmental specifically, or we get into, for instance, human rights within international supply chains. [02:18]  

• And how do you remediate those adverse impacts? The UN Guiding Principles on Business and Human Rights actually has a ladder in terms of how you begin to address that, which now with some of the corporate due diligence requirements that are coming out of the EU, is really beginning to move its way over to the environmental space as well. Where you take a look at, ‘Did you cause that adverse impact? Did you contribute to it or are you directly linked to it?’, and you have different responsibilities. This concept of leverage comes in when you're directly linked to one of those adverse impacts. So again, whether it's environmental or human rights, you have the responsibility to apply what leverage you have to be able to remediate that adverse impact, and if you can't, if your leverage is not strong enough, then it says that you should consider exiting that business relationship. [03:17]  

• That is important when it comes again to running complex international supply chains, especially when you're applying voluntary standards, whether it be specific to that social space or when you get into dictating environmental requirements as well. Or if you have a vertically integrated supply chain or a very close relationship where your company has a large amount of the spend with a specific supplier, then you have a lot of leverage and you can change things. If you don't, for instance with a commodity supplier or where that supplier might have more control because they, for instance, created the design, have the intellectual property, something to that nature, then you have less leverage. And that's really changed the landscape, I'll say. And the power structure within international supply chains to be able to address these two types of these two points of leverage. [04:10] 

Jim - From your experience, has the differences and the frequency of your first leverage versus the second leverage changed over time? I’m curious about it I’m a procurement officer, which ones do I have to pay more attention to? [05:08] 

• Bob - Well, they've gone at different paces. So, integrating social environmental standards into product design specifically had a head start. And a lot of that gets into regulation and the demand from the purchasing community specifically. So, there was a greater awareness of the environmental impacts related to the materials in a product, its energy efficiency, its end-of-life treatment as an example, versus some of the specifics around the environmental impacts of Scope 3 emissions, of human rights and supply chains, and other factors. But that's beginning to change as well. And I think part of that was that we saw earlier regulation which set that level playing field related to product level requirements in the early 2000s. [05:26] 

• When it comes to the value chain aspects, those are just coming to light now from a regulatory perspective, especially as it relates to different requirements, for instance, related to traffic enforced labour. So, we saw regulations in California and the UK and Australia, but that's been followed up now in the European Union related to corporate sustainable due diligence - and that's across both human rights and environment. Now those behaviors, as it relates to how products are manufactured and those potential negative consequences from a social environmental perspective, has really changed. So, to some degree, it's trailed a bit, that second piece. But the awareness when it comes to the purchasing or the demand community, which can include others like policymakers and investors, they're really waking up to it. It's beginning to drive different behaviors and as we get into voluntary standards, it's really evolved voluntary standards as well, from just focusing on the product to focusing on the entire basket of ESG practices. [06:19] 

Neil - I think if you look at what's happening in the automotive sector right now, the chemical sector, fashion sector, I think this is where that voluntary aspect comes into play, where you have tier one suppliers in the automotive supply chain running for their money, trying to adapt to or respond to the requests from the OEMs. I'm particularly interested in regulation. In the former category where regulations are a driver - because I think it has taken a very long time - if you look at what happened with REACH and RoHS, and I would even say EP dread in the early days, it took regulation to make the industry move. Do you still see this being a requirement going forward? [07:32] 

• Bob - Well, I think it's important to sort of examine the path that it took. The years prior to the mid 2000s, environmental features and products were really aspirational, and they were very unstructured. We knew that we wanted sustainable products after this realization that we're putting so much into the world and not thinking or considering these types of aspects of the product. I remember picking up in the early 2000s, William McDonough's book Cradle to Cradle, and a lot of it popularized the fact that we're thinking cradle to grave and we need to rethink the way we build products. And that's easier for some types of products that are more simple, very difficult for complex products like electronics. But then we saw regulations come into play, both RoHS and REACH, but also, we when it came to end of life and that began to level the playing field and created centres of expertise in deep corporate functions. So, think supply chain engineering, sourcing and procurement teams, etcetera. Not just these overarching corporate social responsibility teams that were really focused on reputation, where there wasn't a good demand signal to be able to put out that buyers could really point to. They were trying to create a halo effect for their companies. [08:16] 

• So that was one benefit of regulation. Another, which I think is really important, is it took away that excuse from your partners, your suppliers, that you're the only one asking for this. It's too expensive, it's technically infeasible, etcetera. It took a very complex engineering problem, or set of problems, like, ‘How do you get lead out of solder in circuit boards? How do you make that cost neutral versus the traditional solder that’s used in circuit boards?” And that became an engineering problem that got embedded deep in these companies and proved that you could do it. If you continue to produce products, complex products, at the same price point, or even less over time and it was good for the environment and human beings as well, that began to normalize those costing environmental features into product planning and placing it alongside those other common cost variables like quality and labour costs. [09:35] 

• The nice thing then, is because you proved it was possible, that really paved the way for voluntary standards to rise and be recognized as achievable without sacrificing profits and now being viewed as a competitive advantage. One of the interesting things we're seeing now is suppliers are beginning to market back to their customers, the brands that they are ready. They understand the voluntary standards on top of the regulatory standards, and they're the supplier to come to, to be able to help the brand live into those. That is a full reversal in the early 2000s where there was just a massive amount of resistance. [10:36] 

Neil - This is a very interesting point. I want to split this - If you think about it, it never makes economic sense to abolish slavery. Cheapest way to make stuff. There are certain things that don't make business sense, and that's what regulations are for. Where they say, we agree this is not a way to do business anymore. We can't pollute rivers anymore. It used to make economic sense in the past. Whether you do this on a carrot or a stick is irrelevant. But you need a regulation, as you say, to move an entire industry away from something that is inherently harmful, versus voluntary standards, where there is always a business value that you need to create and justify to your customer as a consequence of it. As we move further along, I think we're bridging this gap of all of the bad things that don't make any sense to change, but we need to change. But as you see with energy in the past, energy used to be more expensive. Green energy used to be more expensive and now we're making it cheaper. In fact, right now it's cheaper than common fossil fuels in many cases. Do you see this trend accelerating as we move forward? [11:17] 

• Bob - I certainly see it as a catalyst. I see something else beginning to evolve and change in this ESG space or social environmental responsibility space, which may reduce the need for regulation over time, which is the evolution of the awareness within the buying community, especially institutional purchasers. It's not just to have optional set of points in their scorecards, but they're beginning to become more sophisticated in terms of understanding the impact of the goods that they're purchasing and beginning to set more requirements in market economies. [12:26]  

• The most important thing is having that the matching of the supply and demand. And if the demand side is not sophisticated enough or doesn't care enough to be able to set those requirements and grab onto the voluntary standards in the middle, that market signal, the supply side is not going to react. That's what was happening for a long time and regulation helps accelerate that to the point where it is today, which is a much more sophisticated buying community, a much more sophisticated investment community if you include impact investing. That's beginning to seep its way all the way down into the banks as well, that are investing in manufacturing overseas. To say there are certain standards that we want to see in the factory or standing up in Malaysia as an example, around environmental stewardship, around human rights management. Forced labour is a great example that it does not make economic sense for us to invest in your business and your manufacturing capability and the related capital investments unless these social and environmental impacts are addressed. So, regulation helped get that going. It's going to be required to some degree in the future. But I see the voluntary standards really beginning to take over because of that maturity we're seeing on the demand side. [13:03] 

Jim - When I go back in my history in the environmental field, the regulations initially were key. But once they got in there, my senior managers just said, you take care of it, it's not relevant to me anymore. But I think that's changed. What we're finding is that now, because of the movement that you've been talking about, it's not only the regulatory that provides a foundation, but there's more than that. The senior managers and the businesspeople are really on top of it, all the way through the supply chain and the government. So, I think it's a major transformation that's occurring and it's exciting. I really see what you guys are doing at GEC is laying the foundation for not only the regulatory piece but making the regulatory piece a part of day-to-day business. So my question is, where do you see this moving over the next 5-10 years? [14:20] 

• Bob - I think one of the fascinating things I've seen most recently is I've had the opportunity to work with many of the major brands in the electronics space. It used to be regulatory requirements were and still are paramount. No company is going to act afoul of the law. And at first those were resisted, I'll say. Traditionally, companies don't like being told what to do and want to operate in the best interest of their shareholders without a heavy regulatory regime sitting over them. In this space, it began to rotate when, past the RoHS and REACH days, especially as we're getting into the evolution of these regulatory requirements to be embraced - as long as there was a level playing field that was created, if they could raise all boats to one level, especially where progressive companies, were already ahead of where that level was going to be, then they could springboard off of it to a competitive advantage. [15:26] 

• Now, what were beginning to see with Global Electronics Council and the ecolabel is companies are looking at these voluntary standards like ecolabels, as in the same space internally as the same level of priority or just below that level of priority of regulatory standards. It's a must do. The competitive landscape is demanding it and back to my thoughts here on supply and demand, they're looking for something that is still voluntary, in high demand, is understandable. They can take a standard that's been developed in a multi-stakeholder, consensus-based process that includes the manufacturing and the brand community, but also their buyers, nonprofits, government and policy advocates or policymakers and they can all agree to that standard, and they can drive towards it, so they know what to do. They know it's going to be accepted, and they know if they invest in it, it's going to be a competitive advantage for them. [16:25] 

• So that’s really changed things altogether. In the wild west days before this, before regulation occurred, it was everybody making up what they thought was the right environmental features of their products or corporate behavior and hoping that it was going to land well with the demand side, to now getting through that regulatory space where they had to kind of set that it was actually feasible and possible to all work towards a common standard. To now getting into a space where there are legitimate voluntary standards that everybody's participated in; defines what a sustainable product is, and everybody can then go compete on meeting those standards based on their business models. It's really an exciting time right now. [17:23] 

• Neil - I strongly agree with that because what we found with people we talk to, with customers we talk to, is whenever you talk of compliance regulation, this is, oh my God, we need to do this, but let's get it done as cheap and dirty as possible. Minimum requirement. All of the customers that are most enthusiastic about sustainability and adopting it have almost always been super excited about things that will allow them to sell more to their customers. And that's what these voluntary standards do. They're setting a playing field for suppliers to be able to compete for business with their customers. [18:10] 

• And how can you do that best? How can you do that fastest? How can you do that in the most elegant way? And I was looking at similarities with nutrition labels. I had a fixation for labeling. And 1960, just think about it, no label at all. Nobody understood what food labeling was. Ten years later, it was mandated for a small percentage of products. Right after that, ten years later, there were huge lawsuits around nutrition washing just to steal that, misappropriate that word back in time. Ten years later, there was standards that were put in place. Ten years later, everybody started doing nutrition labeling. Twenty years later, now we have things like coke zero, right, where we're competing against, hey, ours is more nutritious, ours is healthier. And I think this is, we're already here from an environmental perspective. I see with a lot of the standards that already exist. [18:46] 

• I think one of the things that we've had in the past has been when we created all these voluntary programs. I don't think we thought through some of these standards, and I think there was a study that was made something like 400 labels available in Europe and then they had to, I mean, you know, it's more or less the same history, right? It repeats itself with these kinds of cycles. But what it says, if you just look back in time, we're about five years away from this becoming one of those things like nutrition today, where it is strongly one of those things that you compete on as opposed to the past. [19:41] 

• Bob - Yeah, and back to the regulatory aspect of this. If you look at the EU Green Claims Directive as an example, you can have 100 different ecolabels, 1000 different ecolabels, and that doesn't mean they're all the same and that they're all credible. And regulators of policymakers are beginning to notice that, saying we're going to define what a credible green claim is and that's going to begin to take those thousands and begin to narrow them into the credible ones - the type one ecolabels, an example that EPEAT is, where government has to then help the buyer, whether it's a consumer or it's an institutional purchaser, be able to understand all those different kaleidoscopes, that outgrowth of voluntary standards, which ones are the most credible and therefore which ones you can trust going forward. So that's an interesting one as well. When it comes to your analogy around the food space where everybody can say, I have the most nutritious soda, the most nutritious cereal. When you get to a point where there's some level of oversight to what types of claims you can make, that's part of the next evolution, I think, of this whole space on voluntary standards is helping create that credibility among those signals so that the market can trust them. [20:19] 

• Neil - Yeah, and it's already there. The greenwashing regulation was passed last year, and you already see a lot of the standards, there's tons of them that just disappeared because it's now not about which ones you can trust. The ones that don't qualify, that don't meet the requirement of the European Union of this greenwashing regulation, they are not legal anymore. You cannot make a claim based on that label anymore. And that's what's fantastic, we've gotten to that point. If we were to follow nutrition, it's five years from now that this gets to that next step of competitive utopia. [21:40] 

Jim - Bob, could you describe a little bit about GEC's role in developing type one ecolabeling? And how does that relate to or different than ISO? In my earlier background, when we sort of put a stake in the ground of what LCA is, we did it through the International Organization for Standardization. How does ISO compare to what GEC is doing? [22:14] 

• Bob - The Global Electronics Council, or GEC, we have a broader mandate than just the EPEAT ecolabel. It happens to be one of our most powerful vehicles. But overall, we're looking towards a vision where only sustainable products or sustainable electronics are bought and sold in the world, no matter how that happens. And that has to do with both education and advocacy of both sides, that supply and demand side I mentioned before. So purchasers know what to ask for and how to ask for it, and suppliers know how to get there and how to build sustainable products. EPEAT, as I mentioned before, has really grown from being very narrow in terms of only product environmental aspects of the materials that are used in the products, the energy efficiency, the design for end of life, the availability of end of life treatment, things like that into a complete lifecycle eco label that considered not only the product itself, but the corporate policies and behavior as these products are manufactured, distributed and brought back into, as we’re getting closer to, a circular economy. So that is a whole different ballgame. [22:38] 

• The analogy, “this isn’t your fathers Oldsmobile”, this is not your father’s or mother’s ecolabel any longer. It really is the complete signal for anybody looking not only to buy a product that is good for the environment, but one that's built by a responsible company and a responsible supply chain. Now as that relates to ISO, and specifically ISO built standard in specific areas, and quite a few of them, EPEAT references ISO standards and other standards which are applicable and tries not to duplicate them. So, it takes where a standard exists, it references it and amplifies it through acceptance of the ecolabel. And where standards don't exist, it builds them within the ecolabel to cover all the major material areas in the space, circularity, climate, chemicals, responsible supply chain, as good examples. And again, creates universal standards or ties together existing standards like ISO might develop or others into a single, what we call the easy button for the market to be able to select, to know that they are getting the best of the best. [23:54] 

Neil - Wouldn't you define the ISO standard as the rules versus EPEAT as defining what the finish line looks like? [25:11] 

• Bob - Yeah, I think the ISO standards help with the rule set. I will say again, there are gaps in those rule sets sometimes, and that's where we need to fill it in. But EPEAT, you're right, EPEAT is a system. It's a system of not only the standards that underpin each product category, but the integrity that's built into verifying that the product meets, and the companies meet those standards themselves, and the registry shows the world where in the standard set, because it's not static, it's not just a binary. There's a bronze level, which is a sustainable product, and then there's silver and gold, which show products and companies that go to that next level of sustainability criteria where many are not already. So EPEAT is an entire system. ISO are some of the standards that underpin it, along with other standards. [25:20] 

Jim - To follow up on that, when we did the work with GEC a couple years ago on the ultra low carbon solar, we had an elaborate multi-stakeholder group very much engaged in the process, which created many hours of conversation and a lot of work behind the scenes. Could you articulate the process and what you're doing to establish the credibility of the GEC EPEAT label? I think that would be helpful to our listeners. [26:13] 

• Bob - That's a great question, specifically, because, again, getting back to that market signal I keep mentioning. You have to have something that pushes the envelope enough to be credible to the demand side, the progressive side of things, but that is achievable by those that are producing the products to begin with. There's a tension in there. It's usually a healthy tension, it does sometimes get a little spicy in these voluntary processes. But the product category standards for EPEAT are built with a variety of stakeholders at the table. And there's those that are cozied up to the central table, which are on these technical committees that are managed by, not by GEC, but by outside parties that are standards-based organizations, and that allows the criteria to be developed in a way that will be accepted by the market and will be achievable by industry. And they aren't static, so they evolve as well. They're criteria revision processes and in fact, the process that we're using now for, for the latest set of criteria will give us the ability to revise those criteria more often as the capabilities of industry evolve, as the expectations of buyers evolve, and as new material topics come to bear in the world. So that's the other tension, I'll say, when it comes to a voluntary consensus process - those can also be viewed as slow because you have to get agreement across a wide range of stakeholder community. But we're learning ways to evolve those faster, to be able to allow the EPEAT ecolabel or any other ecolabel that chooses to use this type of process to react to what's happening in the world. [26:48] 

Neil - That's very helpful, because out here in Germany, this can take five years to get to a certification body. I want to switch back into the company, because at the end of the day, this is about what can companies do? And if you were to ask, how does a company implement the pursuit of such a standard? There are typically two paradigms for this. Either you have an expert function that sits at corporate and drives this, or you embed this into the individual functions of procurement and product engineering. Do you have any experience from your past, what works better and why? [28:39] 

• Bob - I've lived both models, in my corporate experience. I've lived the model where there's a central corporate function either reporting into marketing or legal. There's a couple of examples where requirements come from on high down to the product teams and they resist and say, but we've got all these other considerations. The nice thing about that is with a very large company, you centralize the requirements, and they are spread out evenly and consistently across the organization. I've seen the other model where the sustainability teams are embedded in the profit loss centres and different product groups, and that creates efficiencies as it relates to sponsorship and working within the organizations that are actually producing the products, designing and working with the supply base to manufacture the products and distribute them. But you lose some level of consistency and in often cases, direct line of sight to the C suite. [29:12] 

• The most successful I've seen tend to be hybrid organizations where there's direct level C suite engagement and sponsorship, but they have champions at the executive level within the product groups and then embedded product stewards or sustainability professionals within supply chain operations, within supply chain engineering, other end-product design teams, etcetera. So, you end up getting a coordination from the top level all the way into the teams. And there's an increasing level of trust, I think, since we went through those difficult cycles of the early days of RoHS and REACH, evolving into where it was a ‘have to do it’ and now it's a ‘get to do it’. So, you see more and more professionals that didn't start as sustainability professionals and move into the deeper levels of organization, but those that are trained as engineers or supply chain procurement professionals or other traditional corporate roles wanting to get into the sustainability field because they're excited about it. Long story short, it tends to be these more, I'd say, sophisticated hybrid organization models that tend to work the best in my view. [30:15] 

Shelley - It's similar to Neil's question, but a little bit different in that whoever's deciding to pursue a voluntary standard or a label, what might you tell them to look for? Considering the evolution in voluntary standards we've been talking about, and that it's, I would say, almost compulsory now in the marketplace to consider voluntary standards, not just from regulations. If you were to break it down for someone to look for a quality voluntary standard or something that's going to meet the future needs of expectations, what might you suggest someone look for? [31:32] 

• Bob - Number one is credibility in the marketplace. It has to be accepted, it has to be scalable, and it has to be built on a system that has a level of trust. Back to Jim's question on voluntary consensus process, the standard gets credibility and trust within a marketplace when it's built with everybody at the table. It has to live into internationally accepted standards on what makes a credible claim. So, in this case it's are you a type one ecolabel? That is the highest level of credibility and authenticity and integrity for an ecolabel. Does it have independence built within the system, not only for how the standards are developed, but for how the products are verified and then put on the market? So that's separation at church and state to understand that the owner of the ecolabel and the standard is not controlling the process to develop the standard, is not controlling the verification of the product, and that the company or the buyer doesn't have an unbalanced level of influence within that process or within the system as well. So those are some of the specifics around what makes a credible ecolabel. [32:19] 

• I'll go back to the scalability aspect as well. It has to be structured and supported with an organization that has the ability to make that ecolabel available in the places where there's the demand for it. So, in some cases you see niche ecolabels that are maybe country specific as an example, and they're very specific to that context. That might be great for the buyers within that context, but if an international company or an international buyer is  looking for a voluntary standard where they can leverage it for the long term, and it'll be able to keep up with the growth patterns of either they're buying or their products they put on the market, then they really need to look for something that's scalable as well. [33:20] 

• Neil - I'd add one more thing, which is ask your customer. They're usually the ones that will tell you this is the standard I want you to follow. [34:03] 

• Bob - That's true as well. Back to acceptance in the marketplace. Which ones asked for the most? [34:09] 

• Neil - Yeah, that's it. [34:16] 

Shelley - Bob, we can end with a final thought or comment to leave our listeners with, given your experience with global supply chain responsibility and voluntary standards. [34:31] 

• Bob: One of the things that I find exciting now is, especially operating the electronic spaces, I think we're over the tipping point and the acceptance of voluntary standards. That's step one: building in voluntary standards into traditional products. But now, as we see what's put on the marketplace evolving so rapidly, the pervasiveness of electronics and the changing way in which we are consuming what electronics can provide us and technology can provide us is altogether different than when we started on this journey as GEC. [34:29] 

• Every product I touch, from the automobile I drive, to the toys I give my kids, to the furniture I sit in everyday has electronics built into it. So, the successes that we've had within our initial foray into voluntary standards, being able to get over that tipping point in scale, is only going to grow exponentially as we're able to move that into different industries and the universe of pervasive electronics and other products. And those are lessons to be learned, I think, for other areas of industry in the buying community as well. So, I'm excited about. It’s a brave new world that we all get the chance to participate in, and it's a brighter future. [35:04] 

Links to things we talk about 

• UN Guiding Principles on Business and Human Rights - https://www.undp.org/sites/g/files/zskgke326/files/migration/in/UNGP-Brochure.pdf  

• US EPA’s REACH - https://www.epa.ie/our-services/monitoring--assessment/waste/chemicals/reach/  

• US EPA’s RoHS - https://www.epa.ie/our-services/monitoring--assessment/waste/chemicals/rohs/  

• Cradle to Cradle by William McDonough and Michael Braungart - https://mcdonough.com/cradle-to-cradle/  

• EU Green Claims Directive - https://environment.ec.europa.eu/topics/circular-economy/green-claims_en#:~:text=With%20a%20proposed%20new%20law,make%20better%2Dinformed%20purchasing%20decisions.  

• ISO Type Ecolabels - https://www.iso.org/files/live/sites/isoorg/files/store/en/PUB100323.pdf  

• EPEAT, global ecolabel for electronics and technology products - https://www.epeat.net/#:~:text=As%20a%20Type%201%20ecolabel,extraction%20to%20end%20of%20life.  

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In this Episode

Shelley - For the sake of our listeners who may not know much about Interface, can you describe what Interface manufactures and its history with sustainability, because it's got a bit of a unique history. [00:34]

• Connie - Interface is a global flooring manufacturer. We make modular flooring, like carpet tiles, resilient and rubber flooring and we're a mid sized company with annual sales of just over a billion dollars. We're headquartered in Atlanta, Georgia, but we have manufacturing sites in many countries across Europe and the Asia Pacific region. But we aren't really known for our flooring as much as we are known for our design and sustainability leadership. We're more of a sustainability company who happens to make flooring. That's the perception of us in the marketplace, I think. [00:47]
• Neil - But you do it well, and that's the point at the end, right?
• Connie - We were lucky to be put on a mission many years ago, back in 1994, when our founder, Ray Anderson, had his environmental epiphany about the damage that the company does to the environment. And he really turned the entire company's mission towards eliminating that environmental impact. Of course, we still have to make flooring and we have to make money to support that sustainability habit, but that's really where all of our focus is and has been since 1994.

Neil - Do you remember how big of a company you were back in 1994? [01:54]

• Connie - I don't remember the exact figure. We were certainly a lot smaller than we are today. We have acquired a lot of companies and we have had organic growth. Back in 1994, carpet tile was our only flooring. We didn't have the other businesses. And carpet tile was just in its infancy. Most carpet wasn't modular back then. It was broad loom and so it's been a real revolution in the flooring industry to move from, you know, giant rolls of flooring down to the modular concept, which is so much more sustainable. So we've grown a lot since 1994.
• Neil - The reason I asked is flooring has been around for a long time. The kind of flooring has changed and as you described, the products have evolved over time, but it's not nuclear fusion, it is not artificial intelligence; these kinds of themes that everybody focuses on. It's quite unique to find something that makes you stand out and it's not often that a company finds it. It seems you guys banked on being the most sustainable company of your kind. Would that be fair to say?
• Connie - Oh, yeah, definitely. We just did it so early in the game before anybody else was doing it. I think that's what really made us originally stand out.

Neil - So how did it start? [03:21]

• Connie - That was so long ago. We began with Mission Zero - our goal to eliminate all of our environmental impact. And it wasn't just a top-down initiative, it was driven by the chairman CEO of the company, which is immeasurable in the impact that can provide. But it was also a groundswell on the factory floor because we engaged all employees in it. Because let's face it, anybody who's in the company who's doing anything, whether you're answering the phone or running a tufting machine, you are contributing to the environmental impact. So how can everybody contribute to reducing or eliminating that impact? And instead of coming to work to help the company make money, you were coming to work to save the world. Everybody was inspired. And you got such great employee energy in that.

Jim - A lot of the interaction we've had with companies in the past is top down. Even the employees are 100% behind it. There's often like a middle manager that begins to stand in the way. Did you have the same belief in action by the middle managers as you did from the top down? And the factory floor? [04:19]

• Connie - Probably the middle management is always the last to adopt the change. But having the drive from the top, it became part of their KPI's and the managers get on board or get off the train. And they tied all the performance and bonus schedules to it. If you wanted to earn your bonus, you better be meeting your environmental targets. So that helped a lot too.

Neil - Sustainability has been around for a while; the good part of about 40 years. But when I talk to product managers and engineers, many of them do not know what it is. And these are highly educated people that are focusing on creating products that are typically very technical that require trade off analysis and stuff like that. How did you end up translating the ambitions of being more sustainable to the entry level or the shop floor employees and what they had to do on a daily basis? [05:05]

• Connie - You know, it's all about the metrics. It had to be measurable, and then you had to be able to score against the goal. So, we got way deep in the details of, there must have been, I mean, there were spreadsheets and spreadsheets of all the different parts of the business that we were measuring, all the different pieces from scrap rates on every single machine. How are we going to reduce this waste? Because, you know, a huge part of our impact is always waste and efficiencies. So, everybody had a scorecard. There were posters in the plant, daily updated with progress. You'd see that a lot in quality, maybe you see that kind of charts and graphs posted about daily quality accomplishments. We had had quality too, but in addition ours were tied to the environmental goals. And the metrics were so fine that you could see, not daily, but probably weekly performance.

Neil - If I'm reading you correctly, you translated, or someone translated that we want to reduce waste. This is something easy compared to the steps to translating reducing carbon impact to the shop floor. If you just had a waste impact and you said, reduce the weight of the bag of scrap, at the end of the day, this is much easier. So how low did you have to go to operationalize this? [06:41]

• Connie - When we started, we weren't doing life cycle assessment. We just had a list of things that we knew we needed to reduce - non renewable energy, virgin raw materials, waste factors. We just had this long list of things we thought were relevant to environmental impact. But then in 2000, we adopted the use of lifecycle assessment for our metrics. And of course, we weren't just focused on carbon. For many years, we were focused on all the different impact categories. But then eventually, ten years in, we started focusing on carbon. So anyway, because we do life cycle assessment on all the thousands of products that we make, you can drill down to the shop floor and say, if you decrease the trim waste by this much, it reduces the carbon footprint by this much. We had to be using lifecycle assessment before we were able to do that. Before that, you could only tie it to cost because financial accounting was all we had at the time.

Neil - Was there any epiphany that came out of using lifecycle assessments that you did not have before? [08:14]

• Connie - When we started we were just a carpet company. The chemistry and the formulation work that we did internally was focused on the backing, which is the mass of the carpet for modular carpet. It has a real structured back for dimensional stability and installation. And that's where our expertise was. We were good at that, and we understood that very well. So, we assumed that's what we should be working on. But we did life cycle assessment and suddenly we realized that's one of the least impactful parts of our product. The nylon yarn on the top, the energy inputs and the waste factors were what was driving. So LCA was very helpful. Unfortunately, it showed us that we had to work on stuff that we didn't have as much control over, but it's what we needed to be working on.

Shelley - There's this other aspect of mission zero that I think would be interesting to look at, and I've heard you mention before that traditional solutions tend to be incremental, and Interface didn't do that. Instead, it set a target to eliminate its environmental impact and called that mission zero. How did not choosing an incremental target change the problem you were trying to solve? [09:12]

• Connie - Traditional product development tends to be improve a product characteristic or maybe add a feature, and you just kind of assume that there's an added goal of improved sustainability, and that leads to, or maybe there is a specific improvement dictated by the product brief, and that usually leads to incremental changes and incremental improvements. It's just the normal way of doing product development. But when the product development goal is to have zero negative environmental impact, you have to rethink the whole plan. I mean, you can approach it incrementally if you have decades to achieve it, but changing your mindset from incremental to reaching zero makes you look at the larger system, breaks you out of your thought pattern that product development usually works in. The seemingly impossibility of zero shakes you out of the normal ways of approaching a project and makes you see things in a new way. You're forced to find new ways to look at the problem.

Jim - When you think about the defined net positive kind of thing, how do you look at ten years down the road and the carpet being replaced or remodeled or things like that? Do you establish partners that will come in and do the recovery reuse, or do you do that yourself? How do you handle the end of life in the design portion of your project? [10:34]

• Connie - It is a huge challenge. We have been recycling carpet internally ourselves, bringing it back from the customer since 1998, but it wasn't robust until 2000. And that's one way to approach it. We had to set up reverse logistics to get the stuff back from our customers, then develop processes to grind it up and separate it and put it back into carpet tile. And that's been our model for recycling all these years. But I will say it's a real struggle because oftentimes the person we sell the carpet to doesn't own the carpet when it's time for it to come back. We've tried a lot of different models. We've tried what we call an evergreen lease, where we lease the carpet so that we can maintain ownership of it. It's very challenging to make the finances of that work, but we're able to do it a little bit.
• Twenty-five years on, even though we bring back millions of pounds each year, it's still a very small amount of what we actually sell. So, in retrospect, I think it's more important to not focus on that closed loop recycling carpet to carpet, but to find partners and look at the broader technical cycle of things being recycled. We also do have reuse partners that we have where we bring back carpet that's still ready to have another life. It doesn't need to be recycled. And we work with these partners, and what they do is they refurbish, clean, process, repackage, and then send it on for another life. And we're going to be expanding on that in the coming years because it's such a missed opportunity. Why grind the stuff up and remake it if it's perfectly fine? We make carpet for commercial interiors, not residential, so it's really high performance and it's a little over engineered sometimes because it lasts longer than our customers use it. I think it's a missed opportunity if we're not moving it into the reuse market.
• Jim - It's like clothes. You know, clothes you can wear a couple of times. It's like carpet. I had blue for five years, now I want a green or something. The flooring is fine.
• Connie - Oftentimes we find that the lease cycle on commercial office space is usually about seven years. And when the lease changes, they change the carpet, need it or not. Or time for, like you say, a new color, a new design. A lot of carpet doesn't see its full use potential.

Jim - With the Green Building council and LEED initiative that's been around for decades, is LEED still a major player in your market? [13:23]

Neil - Just to open up that question a bit more, what is driving consumers or your customers to buy your product as opposed to anyone else?

• Connie - LEED was very useful. It's still in place. It drives a lot of the second comers to take sustainability initiatives and to meet the minimums. It certainly.
• Neil - What do you mean by second comers?
• Connie - I just made that word up, so I don't have a good definition, but I'm talking about the followers. They are just attempting to meet the market requirements. Now, the market does have some requirements for sustainability, at least in the built environment. If you're going to play, you've got to at least meet certain LEED criteria. And so those businesses meet those requirements to do business, not as a leadership position. Where was I? Oh, yeah. We were going to talk about what's driving purchases.

Neil - Why do people still love your product as opposed to anyone else? [14:17]

• Connie - We're focused on what the customer is asking for in performance. We're telling them what they need from the sustainability. I mean, that sounds really arrogant, doesn't it? We spend a lot of time on education, trying to explain what the problem is and what the solutions are. And we try to encourage our customers to want the environmental attributes that we have.

Neil - But wouldn't they need to pay more for it? Connie, how do they react to that? [14:44]

• Connie - I think it's a misperception. People assume that if it's more environmentally friendly, that it costs more money, and that is a construct of the people who are developing products. They're saying, oh, the customer is going to pay more for this because they want it. So, I got 10%, 25% more money to spend developing this product and that’s just wrong thinking. If you're reducing the environmental impact, you're probably improving efficiency and reducing waste and the things that drive down cost. Now, if you’re going to make a new product and you get to spend 25% more. Well, I'll spend it, you can bet. But if you look at it differently, don't make that part of the product brief. You're throwing that money away. Cost parity is job number one at Interface. Ray Anderson, our founder said you got to make it more sustainable, it's got to perform the same and it has to cost the same. And if you would bring it to him and it costs more, he would say, go back to the drawing board. You have to widen your perception of how to get there. It's kind of like putting the zero target on there. Putting the cost parity target on there really changes your development process.

Neil - Connie, does that restrict the jumps you can make? Typically, when you look at efficiency as the prime driver of reducing impact, you’ll make 10%, 20%, 30% improvements. And you do this iteratively, but at some point there’s the law of diminishing returns and then you need to change the game once again, which takes investments a lot of times. Think of the investments that you make in thinking about how to use recycled materials in your product for setting up these relationships for reuse so that the entire portfolio reduces its environmental impact. The question is do you think product managers should consider or leave their options open to potentially having a more costly product, but with a dramatically different outcome, or do you think that it doesn't need to be that way at all? [15:59]

• Connie - I think it can be both. But I think it should start with cost parity and see what you can do. We had to build an entire new backing line and processing line to make our carbon negative products and to make our recycled back products. And the cost of the product, like the raw material cost and the processing cost needed to – and all that investment was based on - making the product cost the same. But of course, there is capital investment in that part of the finance way.

Neil - Is that something that you could use? In Europe, for example, there is tremendous amounts of money for those kind of capital investments. I think that can significantly alter the outcome of the impact of the product. There are even loans that one can get now which are ESG based loans that have better interest rates to fund exactly these kinds of initiatives. Were these helpful to you as a company? Is this something that other product managers should look into as relevant, or do you think this wasn't necessary for your growth path? [17:21]

• Connie - It hasn't been necessary for Interface, but yes, if anybody can take advantage of it, absolutely. We do partner. For instance, we're partnering on a recycling initiative in Europe for flooring with all the other flooring manufacturers, and it's being funded. So, we're looking to get help and participate and use that funding to get recycling for all the flooring industry, not just particularly for Interface. We haven't taken advantage of that as a single company in the past. But, yes, it's a great opportunity for a lot of companies.
• Neil - Ten years ago, this was not a thing, but I think now there's several companies that have looked at this as an opportunity to invest in that next generation of products and processes, to make products that we're currently using.
• Connie - It's definitely facilitating much more rapid product development.

Neil - Speaking of this, at the end of the day, do we have the means to get to the outcome we're looking to do?  Getting to zero was mission zero, as you called it. That's the goal that you set. And the parameters that you set were cost parity, performance parity, and then reduced impact. You mentioned that there were compensation plans that were tied to this. Was there anything else that the company needed to start? The place that I come from is for product managers where this is new, and there are still tons of them where this hasn't been implemented more than, I'd say, experiments. You do a bit of investigation to know what your hotspots are. There's very few, half a billion-dollar companies and up that have never investigated this. I think there's a large portion of 100 million to $5 billion revenue companies that have done something in this space. But for those that have not only done anything significant in terms of investigating what the opportunities are and whether it makes business sense, how to get them to take that first step. [18:43]

• Connie - Yeah, there's so much low hanging fruit with those guys. You got to set a measurable target. I think that's the only way to get started. You can't just have this, oh, the marketing team wants to have a sustainability story, come up with something. And I think lifecycle assessment, it so clearly identifies what those one, two, three things are that you need to do, and you can clearly measure whether you're doing it or not. So, I think it's a great place to start. What are your hotspots? And then list the projects you can do to address them, and then measure your progress using life cycle assessment. Of course, I'm an LCA practitioner, and you know, if the only tool you have is a hammer, every problem is a nail. Well, for me, every problem, it can be solved with life cycle assessment. So, take it with a grain of salt.

Jim - When you go back through the corporate goal of net zero, and that transferred down to individual products. Every product manager in the design has a goal that they can contribute and link back to that overall goal. Could you talk a little bit about how that happens? [20:51]

• Connie - Today our goal is on specific quantified reductions in science-based targets initiative on carbon emissions reduction, scope three emissions reductions. So, we do the lifecycle assessment on every product made every year, which is thousands of products, and we create what is the global product carbon footprint.
• Connie - Our targets are on cradle to gate. Obviously, we're measuring and recording, but we're not targeting reductions in the rest of the life cycle. Just cradle the gate. So, we know in each region how their products contribute to that total. And then at that region, we know which products contribute what. Sometimes it's that they're selling products with a higher impact in one region than more of them in one region than the other, because the market demand for that product style is higher in one place than another anyway. It's granular. It goes all the way down to what's the product portfolio that you're selling. And also, because you can make a great, sustainable product with really low environmental impact. But if you don't sell very much of it, it's not really driving your global number. Right. So sometimes that's the first step. Then you got to figure out how to sell more of it. But the big products where you sell a lot, if you can reduce the impact on them, then it changes your global number. So we're just trying to drive that global carbon footprint down to meet a 2030 goal and then a 2040 goal. And so, every product's contribution in every region, in every factory shows how they roll up into that number.

Neil - This is very interesting. Typically, when, when I talk to product managers, they will look at a product that is not a big cash cow. So, if they change it and something goes wrong, it doesn't affect the business a lot. Don't change something that's working. What you just said is fundamentally opposite and it's true. If you work with a product and create even a perfect innovation and take it to zero, it may not have an impact because it was never a big portion of your business to begin with. Was there a mind shift that needed to happen for you to start considering the big chunks? Because that's a huge risk to affect products that are currently your biggest sellers and probably the most profitable products that you have. [22:49]

• Connie - It was mindset, and it was set by management. I remember the president of Interface, America's sales organization, and he said, we will not introduce hero products: a product that's super sustainable, it makes a great story and it's great marketing, but it's not something that's core to the business. And our competitors are always throwing up a hero product. And I'm like, but how much of that are you selling? It was a real decision internally because our mission was to reduce our footprint, not to gain market notoriety. We were looking to reduce our footprint. So don't make a hero product. If you're going to make an improvement, make it on the core materials that we sell a lot of.
• Neil - I'm going to steal this from you. Hero product. This is cool.

Jim - We've been working a couple with companies about doing portfolio assessments and you mentioned the portfolio a minute ago. Do you have a portfolio assessment approach? Or is it more on a product-by-product basis? [24:22]

• Connie - It's not based on individual products, and we don't rank them because we're just looking at all the raw materials we buy. These millions of tons of stuff. This stuff, it's a certain percent fossil-based polymers and mine minerals. The goal is all of that stuff needs to be 100% recycled or biobased. How can you change all those things to something recycled or bio based? And it's not really on an individual product, it's on the whole tons of stuff we buy.
• Jim - Every company's got their own business model in the way they run the business. So portfolio assessment works for some.
• Connie - Absolutely, especially if you have really different products because flooring, is flooring. They're similar from one to the next. But if I was in the chemicals business, wow, its different products making up their portfolio.

Jim - When I first met Ray Anderson, I participated in the president's council sustainable development back in the early nineties and Ray Anderson was there and Sam Johnson with SC Johnson too; major players in the whole scalability market. And to see Interface - from the early nineties continually through multiple leaders and multiple management structures - still have that same vision that Ray put in place is a testimony to Interface and what you have done and are still doing. [26:06]

• Connie - When Ray passed away several years ago, we were all in a bit of a panic. Are we going to stay on our mission? And we've been through a couple of CEO's since then and fortunately it's just so core that this freight train is running down the track. And it’s successful too. If we weren't successful financially, certainly we wouldn't keep doing it. It doesn't just feel good, it actually is good.

Shelley - That's a great story and you've shared some great learnings for our listeners from Interfaces’ success like building sustainability into core products, not to be afraid of picking a really ambitious goal like mission zero and to measure it, and not be afraid of setting your own constraints to achieve those things. You've really showed how some of those ideas have not only moved your company towards sustainability, but you've been successful too. Connie, I'd love to end with a final thought from you for our listeners, something that you might like them to think about and take away from today. [27:11]

• Connie - Well, I hesitate to preach because product development at Interface is unique because it's a really unique company, and sustainability aspects are always the main driver in our product development. Our challenges tend to be more technical than they are political or logistical. It's always how do we reduce the footprint while also meeting cost and performance requirements. But I guess I would say put the restriction of cost parity on every project, say improve sustainability profile of the product without increasing the cost, and they'll say you're crazy and that's not possible. But that's really where the magic begins. That's where you come up with different ideas. Also, I would say, don't settle for incremental improvements. Make the target a moonshot. Regarding climate change, we don't really have time for incremental change. We have to make real progress and we have to make it quickly. And I think much of that responsibility lies with you, with the product development people. So, I hate to put the burden on you, but it's important. It needs to be done, so get it done.
• Jim - Connie, well said and thank you very much. We really enjoyed the conversation and excellent input, and I'm sure a lot of people will walk away with some very actionable items.

 Links to Things We talk about

• Interface Mission - https://www.interface.com/US/en-US/sustainability/our-mission
• LEED standards - https://www.usgbc.org/leed
• Science-based Targets Initiative (SBTi) - https://sciencebasedtargets.org/

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Al has made his career as an Environmental, Health, Safety and Sustainability Executive and author, and has over 30 years of experience as a subject matter expert in the EHS&S field. His 2017 book ‘Greener Products’ is a must-read – insightful, engaging and a fitting accumulation of the wealth of knowledge Al has picked up in his career.

In this episode, Al, Neil and Jim discuss what product managers should be paying attention to right now, how they can cut through the noise and get to the route of the matter at hand – and what the true goal of ‘greener’ products should be.

In this Episode

Shelley: Al, as you know, our listeners are product managers and others who have a role developing sustainable products. You're active in this space; you teach, you write, and you work in this space. Right now, what do you think is the most relevant thing for our listeners to know? [01:00]

• Al: I have done quite a bit of research on making products more sustainable or greener. Whenever I speak, I like to say this: There's no such thing as a green product. And the reason I say that is if you think about a product, like think of the greenest product in your mind right now, and what I typically tend to think about are, like 7th generation products or Method products, because I think of household laundry detergent or dish detergent, those type of things. And those products are very sustainably minded when it came to bringing them to be. But even those products can be improved. If you think about the raw materials it takes to extract from the earth and the manufacturing of those raw materials and then further manufacturing and then transportation to distribution centers and then from there to the place where it's being sold, the use phase of the product, and then the end of life of the product and the packaging, there are improvements that still could be made for a product that some people would call green. [01:15]
• What does green mean anyway? There's no obvious definition for green, so that's why I say there's no such thing as a green product, because every product can be improved. That's why in the book that I wrote called Greener Products: The Making and Marketing of Sustainable Brands. I call it greener. It's a journey. And you can always make a product or a process more efficient, better.
• The other thing I like to focus in on is when it comes to product developers, is that a lot of people are in different places when it comes to thinking how important sustainability is to bring a product to market. But perhaps the strongest case for product developers to get their mind around is future trends. And there is a study by the consulting firm McKinsey. They actually wrote this book called Resource Revolution. I cite that in my book. Some of the things that they are stating will happen is by 2030 there will be 3 billion more people in the middle class and primarily that will be coming from India and China. Anybody who's visited those countries, you see tremendous growth. And if you think about the growth of the middle class, so what does that mean? People coming into more prosperity, so they have more availability, more income to spend on things besides just basic living needs, right? So that means that these 3 billion people moving into the middle class are going to want the same thing that the listeners have. They're going to want cars, they're going to want cell phones, they're going to want iPads, TVs, you name it, new clothing and home goods. With all of that, it's more difficult to extract materials from the earth. So new mining discoveries have flattened; it cost like twice as much for an oil well that it did over a decade ago. All these come from that study. So no matter what you believe or think about sustainability and about the biggest issues in sustainability when it comes to climate, or even what I call the war on plastics, because there's pressure on single use, disposable plastics, whatever you think about those things and how dire you think they are or not, everybody can agree on, these are trends that are really happening. And it's going to put more pressure on raw materials. So raw materials are going to cost more in the future, they're going to be less available. Therefore, what we have to do is design products in a more efficient, better way. And that's to me one of the most important things for product developers to be thinking about.

Neil: Al, I think the idea of a greener product, it resonates with me. At the end of the day, even when you design new products, it's always an iteration. There are very few products that are just fundamentally new. What is the goal? Is the goal the continuous improvement in your view and in the context of this future - the demographics where we will have to do a lot more with less - do you think that's the equation to use? Which is if we keep cutting out inefficiencies in the process of how we take raw materials and make products out of it, we will hopefully, maybe not decouple, but increase our ability to serve this broader mass with the limited resources that we have or the decreasing availability of resources that we have. [04:58]

• Al: Like with anything from a sustainability perspective, there's multiple things to be concerned about and to be thinking about. Just look at your cell phone nowadays. How many devices you go back 10, 15, 20 years ago had to be made with more materials for all the functionality of that cell phone. It's not only just communication device, it's a camera. Sometimes we forget about all these advances, and technology is always advancing and getting better and better. That's one of the things, yes, we have to make things more efficient, and efficiency is one of the lenses we should be looking at. But when we do sustainable innovation of new products, what we want to do is look at various lenses. [05:40]
• Another really interesting concept that has cropped up over the last ten years or so is the whole idea of circular economy. And this ties into original design for the environment thinking like design for disassembly. We talked about those things for years, but now it's becoming more and more imperative and more and more people are looking for this. And designing products that have greater functionality with less materials, less resources, is really one of the things. And then always keep in mind the shelf life of this product. At the end of its life, what's going to happen to the packaging? What's going to happen to the product? Can it be like that whole cradle to cradle thinking? Can that end of life of that product and packaging be raw material into another?
• Anytime you can mimic nature, and that's a whole other great concept too, biomimicry, it's a win. Because you're following things that are more efficient and that's the way the world operates. I think when we violate that type of thinking, that's when problems happen. When we just have single use disposable plastics, for example, and when you're not doing things that can break down anymore or put back into commerce, then you're not designing things very efficiently and you're not doing the best you can as a product developer.

Neil: The challenge we have is as sustainability experts, we have all of these ideas; and you talked about circularity, biomimicry, dematerialization. But for product managers that are, I don't know, building the next laptop, what would you ask them to use as primary design parameters? Because there could be secondary things that you want to look at to make sure you're not creating harm. But is there something that you see, given the market today, given the environment today, given the societal apprehension to a lot of, I think the anti ESG wave that you've seen recently could be simplified for product managers and say, pick these three things and they will be a great primary design parameters when you're designing new products. [07:34]

• Al: You hit on a lot of good things there and let me quickly address the whole anti ESG thing. To me, anti ESG isn't relevant to manufacturing companies or companies. It's really more for those people selling stock and managing stock funds. And that's where I think a lot of this anti ESG thing came from and it's not a understanding who you're working for and who the consumer is or the customer is. So that doesn't affect Estee Lauder, where we're making prestige beauty products and making them more sustainable and thinking about the packaging at the end of its life and making it more recyclable. Matter of fact, our consumers, our customers are looking for us to be paying attention to these things. And we always see these surveys. Now more and more people are interested in buying products from companies that are good corporate citizens that are doing things the right way. So if you're stepping away from these things and you're not paying attention to these things and your competitors are, you're going to lose. [08:17]
• Now, one of the other things that you hit on that I think is super important, and I worked with Jim when he was working as a consultant when I was at Johnson and Johnson, is anything you do for a product developer or a marketer to help them to make a product more sustainable has to be something simple. If you make something complicated, like, oh, we want everybody to do lifecycle assessments, and it's going to take forever. If you slow down the R and D process, the new product launch process, you've lost, forget about it. You got to keep things simple. It's got to fit into regular business processes. That's a winning proposition. So what should you focus on? And this takes me back to the days when I was working with Jim and kind of call him the godfather or grandfather of life cycle assessment. Lifecycle assessments are a really great tool. They're one tool in the toolbox, but lifecycle assessments are really helpful to identify hotspots. And I worked with Jim and we developed, when I was at Johnson and Johnson for all the product categories, i was like bar graph of where were the biggest hotspots for, let's say a consumer product that was like a shampoo. We did category life cycle assessment. We found out where the hot spots are. Was it in the raw materials? Was it in transportation? Was it in the use phase or the end-of-life phase? And then we had a simple bar chart. And you can imagine just seeing a bar chart and where the highest impact areas were, or the medium ones is where you should be spending your time. Because if you're spending your time on, let's say reducing water in the manufacturing process and that's like a low life cycle impact, then you're not really moving the needle. But if it's the energy use of a plug-in product and you're making that product more energy efficient, that's what you should be focusing on. And then not only that, you can use that as a marketing claim. Hey, we've made this product more sustainable, and we reduced energy by, let's say 20%. And on top of that, the lifecycle cost of running a piece of equipment is going to be less. So, you're tying in multiple green marketing thoughts here. It's cheaper for you to operate this and it also is better for the environment. That's a winning proposition and the simplification tool is really to help the R and D, the scientists, and the marketers to know what to focus on.
• I'd like to just mention one of the things that I partnered with Jim on, we developed at Johnson and Johnson a greener product approach called Earthwards. And in that we had a four-step process, and one of the steps was to understand the lifecycle impact product and make an improvement. You had to make three improvements in the product in order for the product to be considered an Earthwards recognized product. And in that you had to understand the life cycle impacts and the improvements had to be in a high or medium life cycle impact area in order for it to be meaningful. And that was tied into that whole type of thinking.
• Jim: I remember all that work and I remember one of the things that I thought was very important about all that conversation early on was that you needed to lay out what is the vision of why you're doing all this. And part of the effort that when you went in, you really got to the point where when we're done, we're going to be successful because we've had a greener product, but it also creates a cost, a brand improvement, reduce your risk, things like this. So, it's a much more of a combination of sustainability, environmental and business value. And that was part of the vision. It was going to be greener, and it was going to create a business value. So, I think that was part of the thinking, which I think was foundational to why the Earthwards were such a powerful tool. [11:58]
• Al: I mentioned this in the greener marketing part of my book, that sustainability should be an ‘and’. In order to win in the marketplace, your product has to be at the right price point, it's got to be high quality, and if you can demonstrate that your product is more sustainable than the competitors, all other things being equal, then you should win in the marketplace. That kind of ties into what you're saying. [12:43]
• One of the things that's super important for product developers to think about is become best buddies with your marketers, whoever's working on your brand. Because whenever you make an improvement, you want to be able to speak with facts and data to your target market. It could be a consumer or customer. If you're business to business type of a company, you should always be thinking about that too. The example I gave about energy efficiency and cost savings. You should be thinking about those things and what claims could be made and what substantiation. In order to avoid greenwashing, you have to have facts and data to substantiate anything you say from an environmental perspective. And we're seeing more and more pressure on this, which is a good thing in Europe, where they develop legislation now to prevent anti greenwashing, which is good for companies who are science based and have a lot of data to substantiate what they're saying publicly.

Jim: I want to follow up on something you'd said earlier: you got the customer, and you got the consumer, you've got corporate policy, and you've got the conversation you had about the increase in the middle-income folks, and you've got all the standards and regulations coming out. What kind of guidance do you give to a product manager? How do they decipher all that? [14:02]

• Al: It ain't easy! It's getting more and more complicated and more difficult, like in Europe now, things that used to be voluntary. Think about the sustainability movement. It's really a business-to-business movement. And one of the things I speak about in my book too are market drivers and big companies like Walmart when they started talking about sustainability. Think about like the largest company in the world asking their customers who are selling product in their stores to tell me about your packaging and is it recyclable? We don't want you to use these specific ingredients in your products, even though you're allowed to from a regulatory standpoint. What type of greenhouse gas emission programs do you have? Are you adopting green power? Help us with Project Gigaton that we're committing to. Because if you think about lifecycle assessment of a Walmart business, it's not just stored. The biggest impact are all the products that are made by all the other companies that get sold in their stores; that whole scope 3 greenhouse gas emissions. So, you have the customer and the business-to-business type of pressures, and now you have these regulations. [14:33]
• Just about every Fortune 500 company voluntarily puts out an annual sustainability report with goals, targets, metrics. But now Europe is mandating that, and it's going to start kicking in over the next couple of years. Even if you're not headquartered in Europe, if you sell in Europe and you're a substantial company, which pretty much any Fortune 500 company would fit into that category, you're going to have to comply with this European sustainability reporting directive. That's one of them. The whole green deal is a whole bunch of different initiatives. It's very complicated. It's getting more and more complicated. So, you have to have good management systems in order to do that. And you have to embed these management systems into the new product development process. You have to have stronger than ever connections within a company with your regulatory affairs group, with your public affairs team and your law department. Everybody's got to be on the same team, working together, understanding what the requirements are and then building that in. And a lot of times, sometimes the customer requirements trump everything else because you got to sell your product. So, you have to listen and you have to get good customer insights in order to set up your new product development keys the right way.

Jim: Thank you for that, because that's my number one golden rule. There's no such thing as green products, only greener products. So, I appreciate your willingness to share that. I'm wondering if companies are responding to the regulations and I don't need to do anything more because I don't really care whether it's greener or not. If I meet a regulation, it's green, and that's all I have to do. I wondered if you could speak to that. I mean, are these government requirements actually creating a barrier for really this greener perspective? It's a more sustainable perspective on products. [16:43]

• Al: Yeah, that's a good thought. I haven't thought about that much, but I do have some ideas here. I would say that if you look at the European legislation, it's more of a risk management perspective. It's looking at like human rights, and these are things that we've been looking at for years, right. But they're actually codifying, looking at human rights, it's looking at deforestation and things like that in the supply chain, other packaging. Of course, companies could always just take the minimum, but if you do that, I think you're putting your company at risk. Let's say if you're a business-to-business type of a seller, the greening of the supply chain type of movement, which has started many decades ago, that continues to go. If I'm trying to sell to a company that's considering sustainability as one of the factors of buying your product, and are you going to help me with my greenhouse reduction, greenhouse gas reduction goals? And if you're totally ignoring that, I think it's going to be a losing proposition in the future. You have to pay attention to these things and you have to be proactive. Even the European legislation, it's a part of sustainability. It's not covering everything. [17:17]
• One of the things we do at Estee Lauder is we have a sustainability trend tracking process and we look at what's going to happen next. What are the cues in the marketplace. We look regionally, we look at what NGO's are saying, and we look at what leading government organizations are saying and in a policy realm, and we kind try to predict what the next thing is. And there's always new things coming right now. Like, the newer thing is this whole biodiversity and nature connection with climate. It's all mashing together and becoming a big issue. So, we read that and we tried to position our company to be able to stay ahead of that type of thing that's not covered in the legislation.
• Legislation is always going to be lagging. That's another good concept, too. You have to comply with the regulations. But if you want to stay ahead of these things, and reputation is one of the biggest business driver for sustainability. If you are found out of doing something that would be considered not favorable by your target customer group, it could hurt your reputation, and you could even lose customers for life. Who wants that, right? So you have to be proactive with sustainability in order to win. I guess there's some risk of that but I think the companies that will be taking that approach are really just trying to get by.
• Neil: I think also if you look at what kind of regulations are being put in place in Europe, they're not telling you to do anything besides disclose what you're doing. [19:42]
• Al: [19:52]
• Neil: And we use this in one of our previous podcasts, where principally what they're doing is they're putting companies into glass houses so everybody can see what they're doing. So, I don't think it's setting as much, at least with the customers that we speak with, it's not setting a target in terms of what is the level of sustainability they need to achieve in their products and services, but more about the kind of pain that they have disclosing probably what they're not doing. [19:53]
• Al: It's actually pretty smart. If you look at the United States regulatory process over the decades one of the things they did many years ago, the US EPA, they asked companies to volunteer. Well, it was a regulation to report on toxic release inventory. I still remember this from when I was at Johnson & Johnson. And just reporting it alone then, you know, news agencies putting reports out there, it put tremendous pressure, made us all say, how are we going to reduce these things? How are we going to do something differently? Just that alone. And then the other smart thing the EPA did - voluntary programs are sometimes the most effective - they sent letters, a letter to the CEO's of companies to say, would you like to commit to our 33/50 program? It was like reduced emissions by 33% by such and such a year (I don't remember the years) and 50% by such and such a year. And then of course, it's one of the talking points, “we signed up to this program” if you're getting pressured in the news media. And just by sending a letter to all these CEO's, it reduced toxic chemicals dramatically, millions of tons of toxic chemicals. Just by making data available publicly is enough to get action. [20:19]
• Jim: The reason I asked the question is because it goes back to my golden rule three: Information is essential, but not sufficient. And I'm afraid companies are going to look at these regulations and they're going to say, okay, now that's all I need to do. I don't need to worry about this kind of thing, which I think the opportunity for us and others and you all within the companies, you need to be able to explain what those regulations are and where they are good and where they're limited, to be able to get to the point where the real value of moving and embedding and sustainability and the environmental attributes and social that are critical into the decision making, into the product design is where the business value is. And yes, you're going to meet the regulation, but that's just the minimum. It's essential, but not sufficient. [21:36]
• Neil: But Jim, I'm not going to ask to walk back on regulations. [22:23]
• Jim: No, no. [22:27]
• Neil: We worked almost 30 years to get these regulations in place that create a minimum requirement of companies to disclose. You can still do as bad as you want. You can still do absolutely no eco innovation. Your products can be as dirty as they are right now. You just have to tell us now. And by telling us, it becomes public. With CSDDD, which is the due diligence directive, there is liability associated with that. So, I disagree that it's going to make people complacent. Fulfilling the regulation means I'm going to disclose this information publicly. It doesn't talk about activity. [22:29]
• Jim: Yeah, I didn't mean to imply that that was the minimum. I'm afraid that some people may think that. And for us, what we need to be able to do is recognize its value, and it's important. But there's still more needs to be done and helping people understand the distinction. But then say there's more to be done, and these are what else needs to be done to build off of those requirements. [23:11]
• Al: I think companies that are serious about sustainability are going to continue to do what they've been doing. If you look at our company, my current role in Estee Lauder, we look at the key groups, and if you look at the key groups that we focus in on, it's our consumer. So, our consumers want more sustainable products, especially the Gen Z and millennial consumers who are getting more and more income now as they get older, and they want to buy prestige beauty products like ours. They want to know that we're paying attention to the packaging, you have climate goals, you're making progress on them, the ingredients that we use; they want to know about all that stuff. You look at investors. We just recently met with roughly 30 of our top investors, and they all continue to ask questions about sustainability, ESG, and they still think it's important. It's one of the lenses that they look at from a risk perspective. Are you managing these issues? Because they know that if you get behind these issues, it can really hurt the reputation of the company, it can hurt your reputation with the consumer and therefore hurt your sales and therefore hurt your stock price. So, they're looking at that, too. And then our employees are another group too. Most employees nowadays, especially those coming out of the university now, they don't just want to work for a company for a paycheck. They want to work for a company that is serious about sustainability. They're a good corporate citizen, and they want to hear what you're doing. And our employees, they love to hear about the stuff we're doing, especially when it comes to, like, greenhouse gas emission work. [23:34]

Neil: Al, there are so many reasons for companies to invest in a more sustainable way of doing business. But have you seen product managers who still have this apprehension? And more importantly, have you seen product managers that have overcome it? And what I'm trying to figure out is, what was that switch that you might have noticed that we could identify, or at least product managers that are listening to this podcast could identify and say, hey, this is my time. This is what I would use to be able to create the case, to doing business differently, to creating new products differently. [25:11]

• Al: So, what happens probably in all large companies, is that top management gets it right. And they say we should do all these sustainability initiatives and it should be a priority for us. Then as it goes down lower into the organization, we have this as a requirement, but we also have cost pressures., and you have profit, P&L responsibilities. You have all these other priorities you got to match along with sustainability. So of course there's going to be some people who are going to push back on it, especially when there's times like we're living in with inflation, that’s putting pressure on raw materials, and you have to look at cutting costs, it becomes more challenging. How do people get over that? I'll give you an example, a fairly recent example. Towards the end of last year, 2023, we did some training of our top executives on climate, and we covered our climate goals. We had a third-party consulting firm who helped to deliver the message with us. And we showed everybody what our objectives were, we shared what the three groups I just mentioned that it's very important to them. And really, when the rubber meets the road, I remember our CEO telling me when I started about five years ago at Estee Lauder, is that everything has to have a business value, and that's the way businesspeople think. So, you have to demonstrate the business value. And the business value is that our consumers, investors, employees, and employers are looking for this. We've made these public commitments, too. We have a science-based target, for example, for reducing our greenhouse gas emissions by 2030. And after that, it was pretty telltale that we started having some senior vice presidents that were more eager to identify programs that can be deployed to reduce, let's say, our Scope 3 emissions. We started getting more traction on things. Facts and data, that's what gets management's attention. [25:45]

Shelley: And this is a good segue into how we often like to end this podcast, which is how do we translate what we've been talking about with these market trends, increased regulations around sustainability and being in a glass house? How do we translate that down to the product manager and bring it down to something that they might be able to implement next week, on Monday morning, and do something differently? What would you like to suggest or recommend a product manager think differently about next week? [27:54]

• Al: Make sure for the product that you are responsible for that you understand what the hotspots are, where the key initiatives that you need to focus on, as I was mentioning earlier with life cycle assessment. But it also could be other trends that are coming from the marketplace. That's one thing. [28:20]
• The other thing is that 80% of the environmental impact of a product is set in the concept stage. I've heard that in multiple places. So, if you don't have sustainability checks in the concept stage, you should develop it. It doesn't have to be anything really complicated. Again, to our earlier discussion, keep it simple. But if you know what your hotspot areas are, just ask some simple questions. Let's say you know there's some ingredients of concern, or raw materials of concern that your customer's not looking for; have a simple checklist or something like that to think about what the most important sustainability concerns for that product type are. And that's what I would say as far as trying to make it practical.

Links to Things We talk about

• Greener Products: The Making and Marketing of Sustainable Brands by Al Iannuzzi - https://greenerproducts.biz/
• McKinsey Global Institute, Resource Revolution - https://www.mckinsey.com/~/media/McKinsey/Business%20Functions/Sustainability/Our%20Insights/Resource%20revolution/MGI_Resource_revolution_executive_summary.pdf
• Earthwards at Johnson & Johnson - https://www.jnj.com/innovation/earthwards-a-johnson-and-johnson-program-helping-create-a-more-sustainable-world
• US EPA 33/50 Program - https://archive.epa.gov/oppt/3350/web/pdf/3350-fnl.pdf
• The EU’s Corporate Sustainability Due Diligence Directive (CS DDD) - https://www.consilium.europa.eu/en/press/press-releases/2023/12/14/corporate-sustainability-due-diligence-council-and-parliament-strike-deal-to-protect-environment-and-human-rights/

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If you don't know about Stanley Black & Decker, it is the largest tool company in the world with over 100 manufacturing facilities worldwide. In his role, Dan leads the ‘innovate with purpose’ pillar under the corporate social responsibility strategy, which includes goals focusing on addressing unmet societal needs, circular design, and sustainable supply chain.

In this episode, Dan, Neil and Jim discuss the problems product managers have in embedding sustainability into products, recycling quotas and design requirements and the growing demand for a ‘greener’ approach.

In this episode

Shelley - Dan, could you start by telling us what you think is hindering product managers from embedding sustainability into products? [01:09]

• Dan - It's not that product managers don't want to. I just think the nature of the job has been so granularly focused on the details of the product itself in operation. How much does it weigh for a tool? How much power does it have? Does it rest nicely on my belt hook, right? We're talking personal preferences on how you use a product and gathering those requirements of what is going to make a winning product. [01:22]
• It's not that end users don't care about sustainability. I think there's an assumption from an end user that things of that nature, such as following the laws, and minimizing impact when you create things that companies are doing that already. And it's not on them to tell product managers, even if they know how to communicate that in the first place, because sometimes if you're not in that space, you just don't know the details.
• What I think misses a little bit is that the follow up because the end-user is not saying anything about it [sustainability]. So, it doesn't get placed in a high priority in the product specification because the end user isn't directly saying it. But we all know it is needed at some point to either pass through a regulatory requirement or even the customer. And in our case, our customers are retailers because we don't sell directly to the end user. So, a customer may have a requirement because they're focused on sustainability that we need to meet such that the end user has an option to buy it in that store.

Neil - Dan, could you clarify that a bit? Because I think that's unique to the other conversations we've had. You have two customers, and I think that's not obvious to everyone. [03:03]

Dan - We maybe even have more behind the contractor. The person that hires the contractor could also have requirements. I think this idea of the expanding end user and seeing it more of a worldview about everything you have to hit to get a product out the door, that's when sustainability starts making it into the doc. [03:11]

• Neil - There was a study done by McKinsey, I think back in 2019, where they asked exactly this question because they were wondering, why is it that we don't see sustainability in requirements from customer surveys? And what they found was customers expected brands to take care of this. I think it was a pretty significant number. [03:31]
• That said, we're assuming the brands we buy from are not engaging in unsustainable practices. I think in the past, if there was something bad happening in the supply chain, you didn't need to tell anyone about it. But this has become very different especially and regulations in Europe are forcing this. In one of these podcasts, I mentioned what Europe is doing is, and what regulation does in general is it makes you live in a glass house. And people live very differently when they're in a glass house. And that's, imagine a company living in a glass house. That's what the regulations are doing in Europe around transparency.
• It's important to ensure the company takes care of this and not rely on the fact that customers are not explicitly asking for sustainability. And I think just to elaborate on the two kinds of customers, you guys sell to retailers and then retailers sell to customers. And the needs and requirements that each of them has can be different for direct to customer businesses. I think this is slightly different, but I think for you guys, this is a significant detail when thinking about sustainability strategies.
• Dan - It is for sure. What I think it helps with is that while the end user may not be saying it, the customer gives the cue we need to be focusing on this and our regulatory department as well. But the big thing I found is if it's legally required or there's an official framework (e.g., truth in advertising, safety code), all that stuff in our product development - we handle it not through the end user saying, hey, I don't want that thing to shock me. But we have functions along the way in the product development process that check in and say, oh you want to say this? Do you have data for that? [05:15]
• Really, the sweet spot of how do you crack this nut of how far do you go more voluntarily on sustainability? How much recycled content? If the threshold is 10% from New Jersey in packaging and you want to go 50% to get ahead of the game, where does that come into the design process to do that, if not the end user or a customer or government? And so, I think that's really the place to focus on. [05:58]
• If you want to go over and above and by how much, you almost need to build that into that product spec spot. Because to me, that's the spot where you're not prescribed by some law somewhere to do something like truth and advertising. What does the customer want? [06:32]
• You can do whatever you want there hoping that it matches what they need and that same opportunity is there for the voluntary sustainability stuff at that point in time. Which is why I think it's critical to be in that document because no other function along the way is going to be checking in because it's not a formal law requirement yet. [06:46]

Neil - I'm curious about that very example that you mentioned. Let's say there's a law that says you need to hit a 10% recycling quota. Somehow this needs to be plugged into the development process. Whether it's now 15 or 50 or 100%, it would have already been in the development process. The same thing with you should not shock people. There's no obvious requirement that says please don't shock people. So, I'm very curious about how these kinds of non explicit requirements make their way into the design requirements. [07:07]

• Dan - I think a core of all business ethics is to follow laws. So first and foremost, you're going to say we follow laws. If the law is there, we're not going to not abide by it. But I think over and above, within the backdrop of the safety topic, you also have the civil court system, which you cannot follow the law, go through your criminal penalties, but then on top of that, if an injury has occurred due to that, you also have a potential financial risk associated with that. I don't know how it evolved, but obviously if you're a startup company and you're putting out unsafe stuff and you're being sued and losing a lot of money, you're not going to be in business very long. So, its a negative cost avoidance on top of following the law there as well, that I think helps drive it. [07:42]

Jim - Dan, I saw you post recently on LinkedIn - I'm not sure I got the exact wording - but your feeling is that companies are going to have to embed sustainability innovation because the customers or the end users are demanding it or regulations will require it. And I thought that was right on, and the issue that has to be dealt with is what has to happen to enable the customer and the end user to reach a level that the product managers are all responding (or the regulations have reached a level) and it's a must in every innovation. There's a timing kind of thing that I wonder if you could speak to on how to accelerate that; what your vision is of what you articulated. [08:30]

• Dan - That question was really around what needs to happen and how I envision it is you've got a starting point - the very front end of going all sustainable, 100%, that I'm a super leader because it's the right thing – to, I'm not doing it till a regulation tells me I have to. And companies are all over that spectrum between being the front end best and just barely keeping up with regulation and some even fall behind and get in trouble. [09:32]
• The point is, they were asking, how do you move that? What drives that is from a traditional marketing supply demand perspective - you've got people out there demanding it, paying for it. You see the sale is happening, so you say, this is what our customer wants, and I don't care what the regulation says. So, it's on those customers to enact change by buying better. Then on the regulatory side, again, it's to the people because it's who you vote for and what policies you'd like them to enact. Because the government essentially can direct where the innovation of capitalism goes to make sure it continues pointing in the right direction, and that making money on its own doesn't necessarily imply good. So, you need to be able to vote for people that can say capitalism is good in the sense that it opens up this innovation machine, but it needs to be pointed to the right things we want as a society, or else we'll get things out of that machine that we don't love. My thought on that is that the power is in the people's hands by either how you buy or vote. And those things drive what the companies do, either on the front end or the back end.

Shelley - Dan, you talk about the end users who are already expecting the company to embed sustainability, or there's this zone beyond the regulation where a company can decide how much they want to volunteer taking on sustainable practices. What have you seen that's worked well in this space, and how have you seen that work well for product managers to address that? [11:21]

• Dan - One of the areas I've noticed where product managers are more willing to focus on sustainability is around when we're looking to expand market share. When you're in a situation like that, you're willing to give up a little bit of margin to do something that maybe differentiates yourself from somebody else. If we go by the theory that things that are sustainable generally cost a bit more than the basic commodities available on the market, then you're going to embed that. You'll get a claim out of it, but you also have a cost associated with it, and the question is, can you either recover that cost if you need to maintain margin, or will you reduce your margin, eat the cost and sell it at the same price and try to gain market share as a differentiator? I think there is more play for it there if you're leading the category and you've got a nice margin. Also, your end user is assuming it's there and they're not indicating to you that if you do something better that they're going to pay more for it. Because that's kind of what the end user research is saying, then it's a very tough sell. You're saying you want me to put costs into it for a functional benefit that my end user won't pay for. It's a very difficult thing to do. I find that market expansion is an area - if you're looking to gain some share. [11:47]
• Another thing to mention on this topic is I feel it's critically important to have areas of a company that focus on de-risking. And what I mean by that is, in product development organizations, you're given the task, usually it's not anything brand new from the scratch up. I mean, most of our stuff is the next generation drill, the next generation saw. It's iterative improvement. So, the spec sheet that comes in from product marketing lays out the four or five bullet points that the customer says is what's bad and good about our competitors, here's what we need to do in the next generation to regain share or keep up or take more share. And so those engineers take that in and that's what they focus on. And if I come to them and say, hey, why don't you consider a new material, their mind is, well, my job is on this paper and it doesn't say that.
• Also, bringing in a new material brings a lot of risk because I at least know with the last one, with the same general design and weight – it passed task drop, cold drop, all the things you need to prove out. It's very risky in a tight timeline project to do that. So, my suggestion is, as you're looking at these new materials and evaluating all the way from startups to reputable companies with new material offerings is you need a team to trust but verify that what they're saying can be done, can be molded. The basic hurdles of using a material such that you've de-risked it enough to allow a product team to try to change over.
• And that's really our line, Reviva in Black and Decker, which is our first power tool line that was leading with the sustainable message. That's kind of what happened. The idea came up in the product development room where people are like, okay, what do we do next? What projects are we going to resource for the year? And to somebody it said, oh, look, the data is saying sustainability is getting more important, right, to the DIY end user, and that's becoming more important in the household. So, they came out of that meeting and then came over to the materials team, and we're like, what do you got? What can we do? And we had, thankfully, I mean, not planned just out of the blue, had already been working with Eastman Chemical for about a year, doing the color match and de-risking things, and we were hunting around the organization for a project. Then one came to our lap, so it was one of those cliches of preparation met opportunity. But I think it's very important though, to have a team searching new stuff, pressure testing it, making sure that it could actually work so that you actually have something to offer when the teams come to the door wanting to do it.

Neil - That's super interesting. And that was a success, wasn't it? [15:46]

• Dan - Yeah, it's doing well. We have a follow up Reviva product, so we're still launching products within that specialized sub brand, but we're also planning to move some of this sustainable material over into the traditional black and decker brand you're used to that's orange and black. We felt positive that the sustainability message really resonated. But we don't think it's the right play to lead with it; just have the regular lineup with the sustainability benefits built in. [15:50]
• I think that's pretty powerful. We put something out, we got a response and to me, mainstreaming it shows progress. Rather than having the specialized area for just the green customers, it shows enough demand that generally people want it across the whole brand.

Neil - That's a maturity curve. Companies have started doing that. I think there was a brand that killed their sustainability portfolio. They said all our products now fit that same requirement, and we need to redefine what sustainability would mean if all our baseline products have those same features. I've seen this repeatedly in the automotive space. You'll never go and change the entire product line. First you try and launch something which is unique in a small kind of test environment. Probably this is a new product line. Maybe this is a new feature within an existing product line, and then you see, does it work? If it does, you map that to the broader portfolio and try and bring the whole portfolio to another level. As a consequence. I think that's as successful as it gets. [16:40]

• Dan - That's something we're really happy about. More to come on that this year on those launches. [17:24]

Neil - I read something around how you view products where sustainability is the primary, versus products where the product is the primary. Could you tell us a little bit about that? [17:29]

• Dan - Yes, the graphic you're mentioning is the conversion we're talking about: Reviva was like 50% recycled content in the enclosure, it's got a recyclable box; we put up an end of life tool recycling program because in North America, that's not legislatively required anywhere like it is in Europe. We tried to build product line with circularity thinking tied to it and launch it on it's sustainable and it's a drill. Now it's a black and decker drill, it's got an 18 volts battery pack, it can do all this hard work and sustainability is part of the deal here. We're just building it into the brand. So that's really the shift. [17:44]
• Neil - It's almost like a circle, right? Because you started with product primary without sustainability. Then you took a fork into sustainability primary. You saw that it worked and then you circle back where it becomes the product primary again with sustainability added on. [18:24]
• Dan - [18:39]
• Neil - That is so cool. [18:39]
• Dan - I don't know that we planned it that way, Neil, but you're exactly right. It would be interesting to see features and stuff go through that, where it's like brushless motors, right? It was a big thing: brushless, and now it's become standard on everything because everyone loved it. It's more energy efficient, and you don't have to say it much anymore because it's assumed everything's brushless. [18:41]
• Neil - I think that's the flywheel of innovation. The whole portfolio moves forward by embedding successful experiments back into it. And how you justify the new experiments, we use sustainability, we use regulation, we use customers demanding it, we use lawsuits; whatever these drivers are right. It is always this maturity curve. You start with something small and then it becomes more complicated and then it needs to become simple again, and the simple thing is that it gets embedded into the standard product portfolio once more. [19:03]

Jim - We had a conversation with a product manager, and his comment for his category, he said that two things have to happen. One, the senior manager had to be behind it, and the other is what happens at the end of life. I'm wondering, had both of those come front and center with the Stanley Black & Decker products? Are those issues critical to your senior managers? [19:37]

• Dan - I would say yes, and they're critical to me and then roll up to senior managers because with my role focused on product, we divide up ESG here between a people pillar, a product pillar and a planet pillar. I'm in the product pillar, where the two main goals are scope three and circularity. Scope three being mainly buying better materials to make our products out of. So that's a lot of the supply chain interface, asking them to set science-based targets, understanding their emission profile so they can share it with us, and also this big push we have for electrification, especially in the outdoor and larger power tool equipment space. Recently, in the World of Concrete in Vegas, we unveiled a suite of six tools for concrete working that had all traditionally been gas powered. We're launching a really large battery that can help them do their job all day. So now not breathing emissions, maintenance costs are going to go down, all that benefit with being able to do that cordless; and that helps reduce use phase emissions. [20:14]
• So those two goals are within my scope as well as circularity, which is like standing up end of life recycling. Again, we're not mature enough to figure out how we get what comes back through the recycling program to our supplier so that it costs us to buy it the next time around. That's like the holy grail of making it work; logistics and all that is costing a little too much these days to make that work, but it will get there either through demand or regulatory policies making virgin material very expensive.

Jim - Sounds like you've got wonderful successes. What I like about that is that you've taken what could be in some series of ad hoc activities and put them into two pillars. So you know you're on sustainability primary or product primary, and then that can be used to communicate and use that as a way to leverage and communicate across the whole organization as well as with customers. How have you rolled that out across the entire enterprise of the whole range of products that Stanley, Black & Decker has? [21:58]

• Dan - I don't think we've gone far enough there. I mean, my vision is that we create essentially a playbook of standardized, common ESG advances you can make within our products because we're constrained by what we can do in ESG, by the products we make. So, things like a program with logos that say, this has something better about it, and it's electrified or it's got recycled content or whatever; sort of a menu of standard claims we could get. Product management could see that and say we have the ability to do this and then maybe those claims map themselves to engineering requirements and definitions that say, to earn this logo you need to do this and that. They mark product spec; engineers do it during the development, and you're able to claim it at the end. That's my hope. We don't have that yet, but I think that's a way. [22:38]

Neil - Is that because you just came up with the idea or is it hard to do? [23:40]

• Dan - I don't live in the world of brand and marketing, and I'm sure there's a lot going on there that they need to fix before they get to that. We're going through some big changes in how we look at brands and different things. So, I think just a lot of work has been in front of this. It's not that they don't want to. [23:44]
• Neil - It’s just a cool idea because it templatizes. I think sustainability, unfortunately, until now, has been super generic. You have experts in sustainability who are not experts in product, and there's a translation that always misses. I think of how you scale stuff, and you scale it by removing the abstraction. You need to make it obvious to people who are designing products and I think that's a simplistic way of doing it. I would say simple, not simplistic. [24:06]
• Dan - My hope is we'll be able to get back on that again and then maybe that logo can be used either brand specific or across brands. I mean, we know that this is another issue, like other big companies. Stanley Black & Decker doesn't sell a product with that logo on it. That's purely a corporate logo and I have to check myself on this too, because I'm in the corporate team and I'm thinking about stuff that covers everyone. But you got to appreciate at the end of the day, the end user is like, what's Dewalt doing for me, what craftsman's doing? It's kind of the same company, but they don't know that. I think the messaging has to bleed through the brand and if that means unique looking logos for each brand. But maybe we standardize the engineering requirements under the topical thing. [24:42]

Shelley - Something we like to do on this podcast, as we come to the end, is ask something practical that a product manager could implement next week. Dan, what would your suggestion be to product managers about something they could start as early as next week on how to do this better? [25:31]

• Dan - One of my favorites is look at all the projects you have on your list and make sure within the scope of whatever you're attempting to do in that project, that you're either making progress somewhere socially, like you're benefiting that end user in some way, you're keeping them safer, you're making whatever they do quicker, cleaner, or you're delivering the same function you did before, but with less impact on the earth. And if you're doing one of those two things, then your needle, is pointing in the right direction. For an example of a counter to that, I was at conference at one point in time and somebody shared a story about doing a new shampoo, and the idea was basically, make the pump pump a little more out. And the theory behind it was the end user is not going to know they'll go through the bottle quicker and you'll sell the next bottle. If you step back and look at that, you don't see any benefit to the end user because they're getting less value for their money, and it's bad for the earth because they're wasting product. To me, that should tell you in your gut that's not the right way to be moving forward, even though it makes the business more money. That, to me, is a quick check of making sure what's profitable also aligns with what's good for the world and people in general. [25:52]
• Neil - I think when people were not connected the way they are today, you could get away with something like that. Today, the way we're hyperconnected, my mother knows about what I'm doing before my wife does, and these kinds of things spread very quickly, and they can kill your brand, they can kill your company. If you're a startup, these kinds of things are just the end. Shelley usually asks us this question, too, and I would steal yours, Dan. I think this logos idea made me very curious. Just think, what are the sustainability benefits that one could drive in a company? Just sit on a table, write this on a clean sheet of paper, five things that you could address in terms of sustainability. And what would be the technical or functional requirement that would map to that for the product that you're responsible for. It's not as simple as one may think, because many of these points are based on, I would say, they’re false assumptions, e.g. I think green steel is better than aluminum. I read a story about that. Does it really matter for our business? Do we need that? Can we replace that? I think it's an exercise that would force someone to not just think of sustainability but think about whether it's relevant to their business and whether they could apply it in a real way; and I don't think we do this often enough. [27:06]
• Jim - What I was thinking about, Dan, was going from a Stanley Black & Decker perspective down to the brand. You emphasized the brand, and I remember the work that we did with Johnson & Johnson in the Earthwards program. There were eight questions right at the beginning of the scoping and discovery stage that they had to answer before they could move to the next stage. It was nothing elaborate like in LCA. It was does your product use water; does it use energy? I mean, out of eight, there are some that are going to be important, and then begin to focus. The problem is sustainability is such a broad term that it means anything, and people get confused. So, you go brand by brand and say, these are the 2, 3, 4, 5 things that are critical from a sustainability perspective for that brand and then work within that. Define sustainability as relevant to each brand, not overall for Stanley Black & Decker. [28:29]
• Neil - Unfortunately, there are so few people who know how to do this, but that's an awesome idea. [29:34]

Links to things we talk about

• Reviva Products -https://www.blackanddecker.com/pages/reviva
• World of Concrete - https://www.worldofconcrete.com/en/home.html
• Johnson & Johnson Earhwards - https://www.jnj.com/innovation/earthwards-a-johnson-and-johnson-program-helping-create-a-more-sustainable-world

Who’s talking?

To read about who you are listening to, visit fivelifestofifty.com and click on our bios.

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Bruce discusses the reasons why product managers need to be embedding sustainability into their products, the difficulties of accurately defining what 'sustainability' truly means, and BASF's portfolio steering framework (among a variety of other topics).

In this Episode

Shelley: This podcast is about enabling product managers to improve their ability to embed sustainability into their products. Bruce, with your experience, what are some of the reasons product managers are embedding sustainability into products? [01:15]

• Bruce: Among other topics within our companies, like safety and quality, sustainability right now is a critical aspect to get a handle on and how that's being integrated into products and engagement with customers. We have huge challenges as a society today with growing populations and climate change, and product managers need to understand how their products can contribute to resolving these issues and how, even at the product level, they're supporting their customers and helping them meet their own sustainability targets and challenges. [01:31]
• There are tools and best practices out there utilizing, say lifecycle assessment, that will gather a better, deeper insight, more science based and quantification around sustainability to take internally and work within their entire organization. [02:14]

Neil: Have you seen any examples of where product managers have done this and seen success like the way you have at BASF? [02:42]

• Bruce: Yes. I think the biggest challenge is because sustainability can be a nebulous term. It has many different meanings depending on what product you have, what your market sector is, what region of the world you're in, even how your customers and your suppliers are defining sustainability. So, you need to be able to quantify and define what sustainability means for your product and for your application. Once you've defined it, then you can measure it. Once you can measure it, then you have the data to support linking that to what's important to your customer, and also linking that to attributes that you're getting within your supply chain and down the value chain. [02:52]
• In many cases, product managers may be looking at their product in a traditional manner; looking at the technical attributes and what they've been doing previously that may have been successful. But sustainability brings a whole new perspective to things. They need to educate themselves on what these other attributes are, how sustainability is embedded within their product, and they need to be able to assess that. [03:38]
• We've developed a lot of frameworks within BASF that provide that rigorous, comprehensive, and reproducible framework. It’s also transparent on how we define, measure, and create value through these solutions. We understand where the impacts are occurring throughout the value chain, where the trade offs are occurring. [04:04]
• We need to understand both the value creation of our products and the risk. And you need this comprehensive framework of how you're integrating that in product development and how you integrate that in your communications with your customers. [04:27]

Jim: In my experience with BASF, there's been things that you've done ahead of other companies. What was the process the company went through to move from thinking about it, to BASF becoming a leader? [04:39]

• Bruce: Success and being proactive came from our senior management and from our board when we changed our branding from the chemical company to ‘we create chemistry for a sustainable future’. It brought focus into the value that our solutions, which are our products, are bringing to society and the value they create for society and for our customers. [05:12]
• Having senior management change our focus around sustainability, had the trickle-down effect throughout our entire organization that we really needed to embed sustainability into everything we do - whether it's our project approval process within operations, procurement, but specifically in product development. So we needed to understand the drivers of sustainability now at the product level and how our products are impacting sustainability, not just within our own operations, but throughout the entire value chain. [05:45]
• That's one of the benefits when we developed the sustainable solution steering [SSS] program, which enabled a product manager now to look differently. S/he wasn't just selling a chemical, but was selling a solution, a chemistry that was impacting sustainability at the customer level, at the consumer level, and having impacts upstream in supply chain and maybe downstream at the end of life. So having that structured framework enabled them to really assess things, quantify things and be able to put a line in the sand of where you are now and how you need to innovate to improve that going forward, depending on what your customer needs are and the changing market drivers. [06:23]

Jim: If I understand, with SSS you can classify your product into one of five categories and I think Pioneer is the number one, and I think Challenge is the bottom. It seemed to me that that became an internal driver for change. But if I'm a product manager and my product falls into the Accelerator/Pioneer category, I'm going to get more investment money and looking better in the company. If I'm product manager on a Challenge product down at the bottom, what does that mean to me? Is that a catalyst to change? Am I more likely to change because of that? [07:03]

• Bruce: As I mentioned before and as you pointed out, having that structured framework of how you're assessing your product in the region that you are, because there could be different regulations, different customer demands, the competitive landscape could be different - are influencing whether your product has a distinct advantage out there or maybe there are some challenges that you see from the competitive or regulatory side. You need to be able to identify those and then put a game plan in place in two years and three years. Maybe it's because of a chemical of concern, maybe it's some other regulatory issue. You need to understand how you can adapt to that and be able to be proactive in addressing that and not reactive when the regulations come out and you find out that you have a serious issue with your product. [07:53]
• I think it's enabling us to anticipate, but also be proactive from the positive side in identifying a more comprehensive value proposition that our product has relative to the competitive landscape and how it's linked to what's important to our customer in the market. [08:40]
• So, when you assess sustainability and you're using lifecycle based tools, lifecycle thinking, it can be complex and the maturity level is evolving and it's getting a lot more mature here. But still, there's a lot of misunderstanding, misperceptions about chemistries and value proposition, and upstream and downstream impacts and lifecycle assessment. But having a framework like sustainable solution steering enable us to condense that, make it concise and to create value with our customers with that in market differentiation. [09:07]

Neil: Bruce, could you describe for our listeners what this portfolio framework is just so our listeners know what we’re talking about? Because we talked about challenged product categories and leader product categories. [09:39]

• Bruce: Yeah, the framework we have is portfolio steering, and it's out there that other companies can adapt, and you can get that from the World Business Council for Sustainable Development. [09:58]
• BASF has that program, and we call it our branded SSS. You get a collaborative effort of people (of experts) together, where you're assessing your product solution in a specific application, in a specific region. So, it takes a chemical and looks at its application and assesses it in all three pillars of sustainability. This is where we're branching out. It's not just a product carbon footprint assessment, but you're looking at multi-attribute environmental impacts. You're also looking at the economic value creation that that product could be having over its lifecycle with your customers or consumers or at end of life. And then you're also looking at social aspects as well. So, we're integrating and aligning an assessment of how that product could be contributing to some of the UN sustainable development goals. [10:11]
• So, you get this very comprehensive assessment, and then you compare that against the competitive products that are out there in the marketplace, and you see where you differentiate positively, or maybe where you have some drawbacks. We've quantified those products that have a very distinct and measurable advantage in the marketplace as pioneers, we see ones that are contributing to a lot of these demands that are out there with regards to climate change and renewable resources as pioneers or performers. But we also look at products that we've identified some challenges with and have a game plan to reconcile that and those are the challenge products. [10:58]

Neil: This is so cool - as a product manager, if you're looking at portfolios - the ability to say what does my portfolio look like? Is it good? Is it bad? What is also interesting is that it takes into account where that product is used, in which industry, in which geography (the use case) because where it is used also plays a crucial role. This is something we covered often in our podcast, that when product managers design their products, if you're looking at a car, for example, the same model will lead a completely different life depending on where you sold it. Driving a car in Germany will be very different than driving it in Norway, which is very different than driving it in Texas. Looking at your product portfolio from this perspective - where will my product be used? Not just what it took to make it – is a repeating theme with examples we've taken from the real world. [11:37]

• Bruce: Yeah and having a framework like that and then having a process where it's a collaborative effort, is helping that product manager; s/he doesn't need to do this all themselves. Because in order to assess sustainability, you need that holistic perspective, you need your people from product development, people who have market insights, people who are experts in your supply chain, and sourcing of these raw materials. You all collectively assess that application, understanding the competitive landscape and the regulations; including bringing people in from your environmental health and safety group, people from operations, and seeing how your operation, resource efficiency, energy efficiency programs are helping to contribute to your products differentiation. So, you're collectively looking and assessing this together, and you're doing it on a regular basis. The marketplace is dynamic, things are changing. Your competition is out there as well. And your customers are evolving too. So, this is a program that is not very static, but it's dynamic. You're doing this on an annual basis and really recertifying and verifying that your product still has these sustainable attributes and benefits in that market application. [12:45]
• Jim: What's neat about that, Bruce, is that you have the tools and the technologies and all the knowledge, but you also need to have the change management process in place so all that’s accepted. The SSS does provide a nice mechanism to provide that structure, but even with that structure, you still need to have the operational and the cultural dynamics. BASF has done a wonderful job and as we’ve talked over the years, you've got good examples of what you've done and the role you play. [13:53]
• So, you need the culture and change management, and you have to have the IT and technology to go with it. That's one of the reasons why Neil and I have come together on the podcast. Neil brings a solid knowledge of the IT, tools, and the data and I bring more of the change management process. So, it's a nice combination. [14:25]
• What you've been doing in BASF is an excellent way of beginning to bridge all the science, engineering, environment, and sustainability on one side and then the product manager on the other. You're able to make that communication and become a great translator to enable a lot of this to happen in the role that you play. [14:46]
• Bruce: I think all that is benefited too by our C-suite and executives supporting the establishment of these frameworks and getting everyone rowing in the same direction with our purpose, and that we all need to understand how we're contributing to sustainability. It's not just the product managers, but it's a collaborative effort working together to drive sustainability improvements to the current solutions we have and bringing the next level of innovative, pioneer solutions out there as well. [15:05]
• Jim: One quick comment on that - I was part of the stakeholder advisor council, and we met with the executive team for a day and a half, CEO down. They listened, they asked questions, and it was a great forum. Clearly, it was that C-level commitment, and you could see it roll down through the entire organization. [15:36]

Shelley: There does seem to be an overwhelming scope that the product managers need to consider to manage sustainability at the product level. From your experience, what initial actions should a product manager take, for example, on Monday morning to further embed sustainability into the innovation and stage gate process? [15:55]

• Bruce: I think in many cases product managers today could feel overwhelmed with all the information that they potentially would need to assess - we're talking about value chains, supply chains, customers, end of life, and regulations. But I think they have to look at another perspective and be really excited on Monday morning when they get up looking at that glass half full, or maybe almost totally full, because sustainability is a game changer for their product. You can really differentiate in the marketplace and demonstrate value to your customer in a whole new way. And who doesn't want to bring a new story to their customer? And who also doesn't want to bring a product that you can take to your customer and say, see how this product is really aligned to what you view is important for sustainability? This is how this product is going to contribute to you meeting your aggressive sustainability targets. So it's a great story to tell, but it's also going to help grow your business. [16:14]
• There's a support network out there. Your customers and your suppliers want to work with you in managing sustainability across their value chains. It's not like you're working against them; they want to work together so you can be collaborative with your suppliers and your customers. You're going in the same direction to put solutions in the marketplace for consumers that are addressing these challenges. [17:13]
• And you don't need to be overwhelmed with all this data that you may need, because in my experience, most of this data already exists within our companies. You are measuring energy and raw material, your bill of materials, where you're getting this stuff. It may need to be organized; it may need to be consolidated. But a lot of this information currently exists and there are framework and tools that will help us process information, whether it's a lifecycle assessment, that can really begin to quantify these from a sustainability standpoint. [17:37]
• You don't need to reinvent the wheel. There are a lot of methodologies and frameworks out there and tools that can help assess all this information. I think the first step you can take with a smile on your face is just go to your own internal company's website and learn what your own company is doing around sustainability. When you're armed with that information, go to your customer, your customer's website. Keep it simple. Look at how they're defining sustainability. Look what's important to them, where their goals are, what their targets are, and then connect the dots to how your product contributes to those things. And if you don't know that, then start asking questions internally. Reach out to your LCA experts, reach out to your sustainability experts, and say, hey, how do my products contribute to these environmental metrics and targets that my customer is saying is important to them? You have a great opening for your product management meeting. And if you find some areas where you're not contributing, maybe take that back to your innovation and R&D team and say, hey, my product doesn't seem to be contributing these areas to what's important to my customer. How can we reinvent or remeasure these things to see how we can help and support our customer in those areas? [18:06]
• Monday morning, be excited. Sustainability is here. It's only going to grow and be more important because they also need to realize too that their competition is also addressing sustainability and their customer is very active and interested in this area and they want to work with suppliers who are aligned with them with sustainability and can support them. So, if you're lagging in the industry, your customer is going to go with somebody else. But if you're a demonstrated leader and you're providing information, science based, credible, transparent information about sustainability, your customers are going to want to work with you and you're going to differentiate yourself and a product manager is going to love that. [19:19]
• So be excited. Keep it simple as you become educated about all this information out there. But just try to link to what's important to your customer and use the existing frameworks and information you have to start connecting the dots and see where you're adding value to your customer. And I think they'll be encouraged by the results because it’ll enhance the customer experience and meetings that they're having. I think this will propel them to want to learn more and to re engage this process more deeply in their product development process and also in their customer engagements. [19:57]
• Jim: Bruce, you said two things: ask and learn. As a product manager, you need learn about sustainability and what the company is doing but also what your customers are doing. And by doing that, you ask questions. You don't go to the customer necessarily with a preconceived pitch (you have that in your back of your mind), but you ask questions to understand where they are and what they're thinking and doing in this sustainability area as well. Then once you have that information, you can analyze it and then come back with a bit more focus on your storyline. [20:33]
• I like the fact that we need to learn as a product manager, and then we need to use that learning by asking the appropriate questions that will position yourself for a competitive advantage with your customers. So, learn and ask questions are the two things to focus in on Monday morning. [21:10]
• Bruce: Yes, I agree. [21:28]

Neil: Bruce, I have one question. The environment right now is very different from a decade ago - there's a lot more regulation, more demand, and more willingness to pay for sustainable products, and more intolerance for products that are considered unsustainable. If you saw a product that said child labour was used in creating this product, you would obviously not buy it, whatever the price, and this is becoming more and more transparent. In the past, you didn't need to say that and now you do with new regulations. Is there a price to pay for product managers not taking action on Monday morning? [21:30]

• Bruce: Absolutely, and I think you articulated clearly some of the potential risks of not understanding the broader aspect of their product. It isn't just the plant within their company that produces their product. They have to understand their supply chain risks of where they're sourcing their raw materials, are they sustainably produced, are there issues like you mentioned about child labor or conflict minerals? But they also need to understand too that there's the risk of what the competition is doing out there, and that they need to be able to communicate the sustainability and differentiate their product going forward to their customers. [22:18]
• It's both looking at risk mitigation, but also the value creation and being able to enable your customer. As in our cases here, we're a raw material supplier, and I think our solutions are enabling our customer to articulate sustainability benefits as a brand owner to the consumers that you can actually make claims. And we see a lot of claims in the consumer side around products that have sustainable attributes. Products are now being labeled with reduced product carbon footprints, low product carbon footprints. So, I think it's imperative for companies like BASF and others to add credible information into this that's science based, so that we are supporting credible claims in the marketplace and that we're adhering to these guidelines like the Federal Trade Commission Green Guides about making claims around products. So, LCA and using science-based approaches is helping support that and enabling us to mitigate risk but create value as well. [23:00]

Links to Things We talk about

• SSS - https://www.basf.com/global/en/who-we-are/sustainability/we-drive-sustainable-solutions/sustainable-solution-steering.html
• Portfolio Steering, World Business Council - https://www.wbcsd.org/Projects/Chemicals/Product-Portfolio-Steering-Framework
• UN Sustainable Development Goals - https://www.undp.org/sustainable-development-goals
• Federal Trade Commission (FTC) Green Guides - https://www.ftc.gov/news-events/topics/truth-advertising/green-guides

Who’s talking?

To read about who you are listening to, visit fivelifestofifty.com and click on our bios.

We want to hear from you

Do you have a story about how you are using what you heard?

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We want to know! Write to us at contact@fivelifestofifty.com.

Listen back to parts 1 and 2 of episode 6 to follow the stage gate journey from beginning to end.

In this Episode

Shelley: The launch phase is when you are getting ready to take your product to market. Neil let's start with you. What kinds of things does a product manager need to consider at this phase? [00:04]

• Neil: The first thing to consider is this is the combination of all the effort that you have put in until now. You've got a great innovation, whether it's a product or it applies to an entire portfolio. Maybe you've created new packaging, or more product efficiency. Or across the portfolio, maybe you've invested in green steel, or switched materials to something more sustainable across several products. [00:37]
• There are different ways to communicate this, but the framing is around whether you are B2B or B2C. In B2B your customer is very technical, and they use this information to decide whether to buy from you. They are more educated on this topic than a typical B2C. Therefore, the messaging on these products is to be catered to that customer.
• That’s the most basic thing to keep in mind, and it's more so for sustainability because not everybody wants to know whether it's sustainable or not. What sells this more sustainable product is the goal. It's not about telling the customer that it is more sustainable.
• Also, different markets geographically are more perceptive to different kinds of messages. In Germany, for example, people are looking for things that have claims of environmental sustainability, whereas in other regions this is meant to be assumed.
• Some require you to make a claim about the sustainability value of your product. CBAM is a recent one that is specifically related to the carbon content of products that you import into the European Union. Here you do not decide how to communicate because you send this information to the government and the lower the carbon value, the less tax you pay. There's a consequence of using accurate data. You could use average information and pay full price, or you can be as specific as you can and if there is a saving compared to the benchmark, then you pay less. If you're importing in the hundreds of millions, that's a significant tax saving.
• In other regimes, you're looking at safety of the materials that you've put into your product, whether its REACH regulations in Europe or Prop 65 in the United States. These are things that you need to get in order before you go to launch.
• Another consideration is voluntary reporting. You have type one, two and three environmental claims. You have labels like Blue Angel here in Germany, but there are other similar agencies who will assess your product and give you a stamp. Type two declarations are self declarations where you can write a report, make a claim, and have it validated by a third party. Type three claims are environmental product declarations - an agency principally tells you how to calculate environmental performance or the characteristics of your product and you share this depending on whether you are a B2B or B2C company.
• Type one claims are typically suited to B2C products, whereas type three claims or EPDs are more related to B2B products. And then type two, which is a self declaration, is neither here nor there; you could use it for both. For example, on Microsoft's website you can see the environmental characteristics of the laptop you are buying. This is a highly successful model that many companies are using to help sell products. And it's not an environmental label.
• It is important that when you are making a public claim, it is verified. Last year, Europe launched anti greenwashing regulation with hefty fines, so it's very important to follow the guidance information provided by the government.
• Third is confidential disclosures that you don't make public. You sign an NDA with your B2B customer, and you share information. BASF, for example, does this. Last year they created environmental footprints that are specific to the product for a large portion of their portfolio, and they only provide this information to their B2B customers, which helps their customers with their own disclosures and make better decisions about how they're designing their products.
• There are lots of tools available to product managers that I described to position the product and the value created through the eco design activities in the previous stage gates in the best possible way. It is super important to leverage this. This is not the place to go cheap or to take shortcuts. Make sure that it is clear and used as a differentiator to sell more of your product. The goal is not to talk about great stuff, it is to sell more of this great stuff.
• Jim: Launch is when you've done the analysis, collected the data, and you put a stake in the ground about what you are going to communicate to your specific consumer and why. You have to make those decisions before Launch; you cannot wait to the very end. [07:37]
• During discovery and the business plan stage you've got an initial perspective. You might know you sell to a B2B – like a homebox store - and the consumer who buys from that B2B is not concerned. Maybe they just want the power drill that can go faster or run for 8 hours.
• Know upfront the specific market standpoint, so when you reach Launch, you know what the messages are, the data is documented, and analysis is done. If you need an external review, that's done. You can't wait a week or month before launch and then try to do all that.
• I’ve been in the sustainability/lifecycle business for 30 years, and too many times we get a call from someone who says ‘I'm launching this product in a month. Can you give me a LCA to do ABC?” It's just not possible. Maybe some new artificial intelligence might be able to do it, but in my experience you can't. So, from the beginning of the stage gate process, it's important to look at the three or four areas you think you can make a positive sustainability statement and then be able to collect the data.
• If you're using an LCA, you must follow ISO 14040 and 14044 standards. And there's FTC in North America and the EU has eco design and sustainable product requirements coming out. You need to know these are out there.
• Neil: There's one more thing to consider in the B2G in Europe, which I think is going to proliferate everywhere – it’s the kind of things where you can't put a product on the market unless you disclose information. There's ESPA, for example, which is a new European regulation, which brings the product passport into context. Every product on the market will have a QR code or a reference to an ID where you need to deliver sustainability information or environmental product information. [10:43]
• In three to five years all these products will be activated and regulated. If you've got half a million products, it’s not something that happens in a month. As you build new products, embed a system of evaluating the environmental consequence of making a product in a particular way, in a particular design, in a particular location and documenting this and building this inventory of information, because this takes a lot of time.
• A lot of companies have set science-based initiative targets. The first years when you set the target, it's all great. But after year three, people are looking for how are you doing on these targets, and the targets are harder to meet by just buying carbon credits and stuff like that.
• Management comes to departments in companies and asks can we build products or a product portfolio that has lower carbon impact? Or they'll go to procurement, and ask can we buy materials that have a lower carbon impact? Either way, this is your job and at the end of the day, this is specific to the product you're making.
• Tons of companies started preparing for this five years ago: inventorizing all the activities and impacts. I think you will not be able to put products on the market in the next five years unless you can make claims about environmental performance. If you combine this with things like CBAM, the coarser the information, the higher the cost.
• Jim: Once you've launched you think the job is done, but that's not the case. When you think about the funnel we talked about, its narrow at launch, but after Launch it begins to expand again because you almost do another discovery and scoping stage, because now you're looking at market changes like government requirements, customer expectations, improvement in availability of technologies or data and tools. That's from a market standpoint. [14:10]
• The second thing is procurement. When you launch the product, your suppliers not only have to provide the parts and material based on the agreement, but they must make sure they maintain environmental and social performance requirements that you put into their contract.
• The third piece is what happens at the end of life and in the example of a battery, who's going to have responsibility for collecting, recovering, reuse, and to disassembly? As a product manager you have stakeholder relationships, not just for launch but over the post launch period. Monitor and work with them to make sure they follow through and do their roles.
• We talked to a product manager the other day and they said when they go to senior managers right now, the two things they are concerned about are 1) end of life, and 2) depending on whether it's B2B, B2C, or B2G, the senior managers are committed to sustainability as a corporation for overall performance. You must be able to translate for a particular customer or market. The interaction with senior managers is changing drastically in the last few years.
• Neil: Launch is a hectic thing. Enablement is required. Partners need to be notified. There's a long time to push the message out through the different channels. [18:07]
• The context of what happens to the product after you've sold it has become more popular in the last five years or more because of the kind of regulations that we're seeing and the kind of visibility that you have for products that are creating harm after their end of life. I think it's about making sure you give yourself enough time to prepare for these things. The sooner you start the better.
• Just so you know, if you wanted to do a comparative study – let’s say you're making laptops and you want to say my laptop is greener than the competition - there are rules about what you're allowed to do and you need to have a study according to an ISO standard. This then needs to be verified and certified and a verification can take as long as twelve months.
• I've often seen product managers say we built something amazing. We know it's better than the competition, but we can't claim it because we can't get the verification done in time. making claims, make sure you have a good amount of time in advance to make the preparations.
• Jim: We've been approached within a month or two of product launch by the marketing people who want to go public, and they’ve already communicated to senior managers. At the time I’d say you can't do that because we don't have the information to make those claims. But if you did the study earlier and you find out months before launch that you can't make those claims, the marketing people haven't shared that with senior managers. You can manage that and ask what can we say? [20:16]

Shelley: I'd like to hear from both of you, one or two final ideas about how a product manager can be prepared not to miss any of these important steps, so they don't find themselves too late in the launch phase to make an environmental claim that they want to or something else that is important for them to think about in this phase. [21:34]

• Neil: The process of eco design and eco innovation starts right up front. Don't slack on those early stages because that's what's going to help you now. You don't want to be greenwashing, which is a thing of the past. Make sure you're working on quantifying the thesis you develop early on and keep validating. There are always going to be changes. But make sure you are keeping that consistent model, that digital thread, of how this information changes. This is one thing that I would recommend any product manager to invest in. [21:58]
• We learned this the hard way and we went from CAD designs to PLM systems and PLM systems to the concept of a digital thread. It is for exactly this. You want to document this as early as possible so that you don't have to discover all of this at the end.
• The second, is make sure you know the kind of claims there are, and because you're developing hypotheses, what kind of claims you can make. You can talk to specialists and sometimes even within your own company. Finding this out during the hypothesis phase is super important because it'll help you prepare and, for example, get a verifier in advance. We have customers where they've waited eight months to find a verifier that had the time to certify their results.
• Jim: It’s the realization that launch is just the beginning of the product's lifecycle. And that means that the company - the product manager and his or her extended team - must make sure they can identify changes and if those changes will have an impact on their product. If so, they collaborate to deal with it quickly. It's not rocket science, just a recommitment to teaming with your trade association, supply chain procurement managers, or your extended product management team. But you've got to do it in a way that’s ongoing and you can gather that information, understand it, and be prepared to make the changes necessary so you can stay competitive in the marketplace. [24:07]
• Neil: It's a bit of a tangent, but I see this a bit as debt. You take on a debt to invest in a product and you want to see the realization of that investment. In the engineering world there is technical debt: these kinds of shortcuts you take in order to get the product to market. And I see a third kind which is evolving now, which is sustainability debt: all the shortcuts you take in terms of what you need to do to make your product sustainable. This accumulates, and you have to think of it as sustainability debt because people are counting this information at a company level. So maybe you'll get away with it this year. You sell fewer green products, but you'll get more product out and get some revenue. As you take a product to market, you say it's done now. But keep in mind what debt you've taken on when you take that product to market. [25:36]

Links to Things We talk about

• The Coordinated Activities on the Safety of Products (CASP) - https://op.europa.eu/en/publication-detail/-/publication/130df18a-4e6f-11ec-91ac-01aa75ed71a1/language-en
• Carbon border adjustment mechanism - https://taxation-customs.ec.europa.eu/carbon-border-adjustment-mechanism_en
• Proposition 65, California - https://oehha.ca.gov/proposition-65
• REACH, European Chemicals Agency https://echa.europa.eu/regulations/reach/understanding-reach
• Blue Angel, Germany - https://www.blauer-engel.de/en
• Environmental Product Declarations (EPDs) - https://www.environdec.com/all-about-epds/the-epd
• Federal Trade Commission (FTC) Green Guides - https://www.ftc.gov/news-events/topics/truth-advertising/green-guides

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As the funnel narrows, it’s time to gather more information and more detail. Can you make a justification for what you’re proposing?

In this episode

What is unique about sustainability at the Business Case stage gate? What kind of trade offs might a product manager consider here?

• Neil: During this phase, you're building the case for the hypothesis that you've created in the Scoping stage. This would mean something like, can we make a battery for a car that would take it to 1000-kilometre range? [00:48]
• First check the viability from a technical perspective. Is this technically viable? What would it mean from a cost perspective? What would it mean from a risk perspective? After doing some preliminary exercises on potential benefits of this innovation during the scoping phase, what is the feasibility of this innovation? [01:20]
• On the other hand, what does this mean in terms of market? There are three things to typically look at. 1) Does it provide access to new markets? That is, can I reach customers that I couldn't reach before. 2) Can I win more customers? And 3) is profitability. Typically, sustainable products are associated with the high end of the market, where price premiums are more prevalent. Even though you start small with this innovation, you end up with much higher margins. [01:40]
• Look at the portfolio level too, if you want to improve the performance of the entire company. Because a lot of what you do is not just building new products, you sunset products that are no longer viable or not providing the business value to sustainability value ratios that are acceptable to the company. The idea here is to transition to something, you also need to transition out of something. BASF did interesting things in this space with their sustainability approach Triple S - Sustainable Solutions Steering. [02:25]
• Jim: The whole stage gate process is a funnel. At the top, you have a wide issue at discovery and scoping, then you narrow down the issues and hotspots. Using the automotive battery as an example, things like social responsibility of the suppliers; environmental issues associated with the extraction of cobalt and lithium; and the chemicals used. [03:14]
• Coming out of the business plan process, you've identified initial targets, like these hotspots but also the key goals - recognizing the corporate goals in these hotspot areas, including the goals the product team must meet before it gets to the Launch phase. [04:22]
• Another part of the business plan is to identify the key internal and external stakeholders, including who you will have to compete with or provide information to. You need to have them part of your team right at the beginning, not towards the end. [04:44]
• You lay the foundation in the first three stage gates with lifecycle thinking. Then in the Develop, then Test & Validate phase, you dive into more detail. And in the Launch phase even more detail. Because if you want to make a claim that uses lifecycle information, you need to have more information. There's a cascading level of complexity and a level of detail that you look at as you go through the process and bringing this together in the business plan is one of the most key parts of the whole stage gate process. [05:05]
• It's critical to deal with the end of life of any product earlier in the process. Decades ago, it was a linear process. You develop, sell, and then a product goes to landfill. Now you look at circularity and being able to reuse some of those materials. So, at the business plan phase, you need to identify who the internal and external stakeholders are to reach out to for the rest of the stage gate process? And if it's a hotspot, figure out who the trade associations are, who might be the material recovery companies in that area. It’s a very critical part that can't wait to the end. Many of our clients would wait to the end, then they have to do a study, which takes time because they didn’t think about it in advance. [05:45]
• Neil: This is the point where understanding the implications over the lifecycle of the product that you're building or the innovation that you're making is crucial, not just because these are hotspots, but now they need to be taken into account in a business plan. [06:45]
• The kind of materials you use will determine the amount of tax that you pay when you put this product on the market. The energy that this product consumes will determine what kind of rating you have with the energy star rating. These are implications to be accounted for in the business plan, just like end of life. With extended producer responsibility programs across Europe, and now even in the US, these are now part of the business case. It may make sense to spend more money during the manufacturing process with the materials that you use so that these costs can be mitigated as you move downstream in the development process, but also onto the market. [07:00]
• Jim: The expectations of the investor community, governments, customers, consumers, in the last five years has changed drastically. This is why the business case is critical and why stakeholder assessment is so critical at the beginning. Because your business plan is what you’re going to do, and you need to have external stakeholders be part of the team. It’s one of the things I don't think we've done as much of in the past, but in the last five years, the regulation and activity has accelerated. So, it's an important part of the business case. [07:48]

Shelley: Let's move on to the Develop phase and walk us through what happens from the Business Case to the develop phase. I know I've heard you say this is where the idea meets reality, and we end up putting resources into developing that idea. So, what shifts for the product manager here? What do they need to think about in terms of sustainability when they get to that stage? [08:35]

• Neil: The traditional approach to developing is trial and error. Even today, even in the largest companies. One thing that typically happens is there's an idea where you expect a synthesis into something real and you just don't find a way to get that done. Maybe its the wrong material, maybe the wrong process. [08:55]
• I'd like to combine this with the Test and Validate phase, which is the next step. Where you take this to the market and assess through market studies, customer studies, whether this is going to work. There are many ways to do this. You can use the Internet to test this with a broad number of customers and they will tell you what they like and what they’re willing to pay for it. [09:20]
• The Develop, Test & Validate phases are a cycling process and it's no longer only a question of does it work. There are other hypotheses developed during the early stages based on the hotspots that you found and its key to not stray too far from these hypotheses. [09:40]
• Here’s an example. A company that wanted to change their packaging from cardboard boxes to something more organic, recyclable, and reusable, to reduce the amount of impact. They started innovating and tried a different organic material, which couldn’t be form fed into a hard object, so then they made it a bag, which then needed to be redesigned to fit the product. They kept innovating to the point where they realized the final product just didn’t solve the problem of packaging because they couldn't stack it, the product would be damaged during transportation and so on. [10:06]
• It’s important not to forget what you were trying to test through the Develop, Test & Validate cycle. When things become too complicated, we simplify the problem into does it work? But the question is now broader than it was before. It’s not just across the lifecycle, but across these different criteria that we need to consider – e.g. end of life, how its used, impacts on logistics and transportation. Is it going to technically do the job? How expensive is it going to become? Is it going to be compliant? Will I be able to sell it in the markets? Will customers like it? And so on and so forth. [11:15]
• Jim: If you think about this funnel, it's getting narrower. There’s a pivotal point it goes through under Develop and Test & Validation, to dive down and answer some of the questions. Part of the questions are that some of your customers are concerned about the social behavior of your suppliers. You're going to have to work with your procurement to define what you are looking for. Maybe initially it's just a series of questions you ask your suppliers about what they're doing and how they're performing to get the information, which could use as a screening level. [11:44]
• When you think about the concept of LCA, you have some hotspots in the goal and scope definition, but in inventory, you dive down to get data and information. In this case, you may not need to get all the detailed data, but you need to build relationships with suppliers, so that coming out of the Launch phase you’ve set up a contractual relationship with your suppliers that say they must perform in such a way on social behavior or how they deal with the extraction of their material. You come out of the strategic plan and business plan with some concrete data and information that will allow you to develop goals as you go forward. [13:00]
• During a rapid prototype project a few years ago, we looked at lifecycle thinking at the beginning, lifecycle screening in the middle (which is where we are now), and if you're going to make an environmental claim about the product in the marketplace, you need a more definitive LCA to be able to justify that. So, this phase is in the middle where you're now trying to gather more information and detail and interacting with your suppliers. [13:50]
• The other side of the equation is what happens at the end of life. In terms of screening, you're reaching out to actual stakeholders that represent end of life. It could be recycling companies, reuse companies, that whole circular economy that people are beginning to do business in. Begin to reach out to them so that at Launch you can say you are going to engage with company A, B or C to help solve the recovery recycle problem when the life of this product passes its maturity in 10-15 years. Gather the data and information that will give you enough confidence to launch with the right message and the right stories. [14:20]
• Neil: I think that's an excellent plug for that last stage, which is Launch. All of this is a lot more work than what you would typically need to do to solve a technical problem. It's not easier and if you don't do it, there are consequences in terms of market access, profitability, win rates, the common things of what businesses really care about. [15:04]
• One of the most recent regulations is for anti greenwashing. You can't just claim this is green. You need to back this up and be specific in terms of what you mean by green. And if during this stage you've not done your work to quantify and collect this information so you can make those claims, the effort may not deliver the kind of success that you're looking for. It’s not just about developing the product, but also developing the evidence that you need to be able to make the claim that this is actually better. [15:30]
• Jim: The product manager’s goal is to have a product that's out in the marketplace, but there's a lot of accompanying information. It's the whole ecosystem around that product that's critical and you got to put all that together. [16:02]

Shelley: It sounds like there's a lot of overlap between the Develop and Test & Validate stage gate. Is there anything final and specific we can say about the Test & Validate stage that would be a salient for a product manager to know about? [16:24]

• Neil: Very often product managers, at least at large companies, are looking at an existing customer base where you understand the market and there's a product that you develop based on that understanding. But I think we're at this cusp where there's a whole generation that is going to enter the market as buyers in the next five years. The problem is there's very little understanding on what their preferences are beyond the fact that we know they prefer more sustainable products and are willing to pay more money for it. [16:39]
• In the Test & Validate stage, it's important to keep in mind that you're not designing a product to sell this year, but you're designing a platform that you will be selling over the next couple of years and the customers that you will have will be fundamentally different. Usually, these kinds of generational changes happen every decade and I think we're at that cusp now. [17:18]
• Jim: Using the battery as an example, to me it's testing and validating the life cycle of how long does it last. They do aging tests to evaluate durability requirements, charging and discharging efficiencies or even user experiences - how people used it in pilot projects - and then just long term product reliability. Based on what we talked about in the first four stages, this is when you got to have some data. You have to have data to justify your recommendations and changes that you're going to use to go to market. [17:37]
• Neil: There are things you need to consider when you're testing and validating in a more competitive, regulated, and less forgiving environment, which probably weren’t as critical in the past. It's no longer do you like it? and does it work? and would you pay money for it? But is it compliant? Which markets will I be able to sell it in? Were there significant changes from the initial hypothesis to the final design that would now limit my accessibility to market or win rate or the premium that customers would be willing to pay? I think if you're looking at compliance, is this going to get a certification? Is this a vetted supply chain? Does it embed risks, more long-term risks into the products’ viability for the future? [18:29]
• There are so many different things that make it way more complex to do this Test and Validation today than it was 15 years ago. You need to look at different tools to help do this and access the information that simplify the process and allow you to understand the trade offs during this phase. This is the multi criteria view. If I make this change, how much is it going to cost? Would I become noncompliant? Does it move me away from my initial hypothesis? These kind of trade offs need to happen a lot faster. And unfortunately, given the complexity of the environment that we're in, it's becoming slower. So, you need to switch this with smarter tools and more data. [19:25]

 Links to things we talk about

• BASF’s Triple S - https://www.basf.com/global/en/who-we-are/sustainability/we-drive-sustainable-solutions/sustainable-solution-steering.html

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In this episode we answer how to use sustainability as a lens for discovering opportunities in the discovery and scope stages, which are the initial stages in product development. We also cover the importance of being quantitative and how hot spot analysis and life cycle thinking can help.

In this Episode

What is unique or specific about how to embed sustainability at these two stage gates?

• Neil: When experts think of sustainability, what they’re trying to do is understand the implications of different decisions across the entire lifecycle of a product. It manifests in different ways in reporting, communications, and for marketing. [00:44]
• For a product manager you need to pivot slightly differently. It is, what are the decisions across the different stage gates of product development? And how do you use sustainability as a lens to look at those decisions so that you can make better choices.
• You cannot have the same level of complexity considered by a product manager across these stage gates. It’s central to provide information in a way that enables them to make these choices and that's different from what typically happens in the world of experts in the field of sustainability.
• Jim: the biggest difficulty in the sustainability field is being able to translate the outcome or the significance of the impact into a language for the decision makers, and in a timely manner, over their six stages; whether it's greenhouse gas, biodiversity, extraction water, wastewater, etc. [02:23]
• It’s about translating the results for the decision maker because at each stage, they got to pass a series of tests before the next stage. You’ve got to work together and  begin to work on that translation.
• In the future, people in the sustainability field, are going to be translators – able to translate the outcome so that the decision makers have the information at the right time to make a decision as they go through the stage gate process.

Shelley - What else should a product managers consider about making tradeoffs or the translation that they need to be making? [04:13]

• Neil: I think the trade offs are happening not in-between stage gates, but within stage gates. And the tradeoffs come second to a different and broader perspective that you're using to make those decisions. [04:30]
• Using batteries as an example, how do people look at the discovery phase? This is the first stage of the stage gate process where you're looking for ideas - what to build? What new product? How to improve an existing product?
• Sustainability has never been a source of these ideas until recently. The idea is to use sustainability just like we use technology, new demographics, regulations, and geopolitics to create new products and new supply chains.
• How does sustainability become another key criteria to instigate an idea? I give an example in batteries. If you look at what happened in the automotive space in the last five years, everybody's racing towards e-mobility. They're trying to transition their powertrains from internal combustion engines to at least hybrids, if not complete electric and alternative fuels like green hydrogen and so on.
• When people are constrained on what they're allowed to do and not do when they're creating products, this creates new ideas.
• There are regulations that are becoming more important as idea generators. The regulations in the US, for example, around the Inflation Reduction Act. It's a big thing in the automotive space right now, where it makes a lot of sense to produce in the US. One of the reasons is geopolitics, but another reason is sustainability.
• Through the lens of sustainability, identify the different opportunities to create new, successful products. This is the first thing that often happens very late in the development process. Before the automotive revolution of green mobility came about, this wasn't something many product managers in the battery space thought about. Now people have built new mines, new supply chains, and looking at changing factories. Knowing what the opportunities are through the lens of sustainability is a key thing to understand and develop ideas around.
• Jim: We've been using the term lifecycle thinking/ hotspot analysis in our podcast. When I think about the hotspot analysis or a simplified lifecycle of an auto battery through the various stages of the battery you can identify the issues. Now you have cobalt, lithium and a variety of other things related to the extraction of the raw materials, and the suppliers who are providing those materials. [08:05]
• Early on in the discovery and the scoping stage, begin a hotspot analysis and identify things. How are the suppliers relating to the environment? How are they treating their workers from a human rights standpoint? There could also be aspects related to the use of chemicals.
• You want to get to the point where you are flagging those hotspots early on and using them. Not from a negative standpoint, but by asking how you can use those hotspots to create innovation and new ideas around how to change your product or redesign your product, so the materials you use are environmentally safe and does not have a supplier that uses child labor. This is a critical stage to get clarity on what those impacts are and then that drives scoping and subsequent stages.
• Neil: Exactly and look a little downstream. The fastest growing automotive segment in Norway is e-cars where they have nearly 100% green electricity. The environmental impact of your car is not just in the production, but it's shifted to the use phase. An electric car in Norway has a different life than an electric car in China, India or the UAE. The kind of battery you design, and the kind of car you design for those areas is very different. This is where opportunities come in. [09:55]
• There's a saying in German, we all cook with cold water. Its key to understand how you will create an added advantage by understanding how this product is going to live over its lifetime. This is an extremely valuable driver for ideas. What can you do differently? Looking at the automotive space and where you're selling this car makes all the difference of whether your car is going to be successful or not. The lifecycle perspective forces you to think of this.
• Jim: In Costa Rica 99% of the electricity is generated from renewable sources. They're beginning to have electric vehicle charging stations around, but the barrier is getting enough charging stations up and normally people buy older cars, which don't fall in that category. So it's going to be a challenge to move towards the electric vehicle because there are some barriers to slow it down. [11:57]
• Neil: I don't think it will slow it down, it's going to be delayed. There are certain economies where people can't and don’t buy new cars. The secondhand market is pretty big. When these e-cars reach their end of first customer life, they'll be sold forward, and this is where there's huge opportunity. [12:37]
• This comes to the second stage gate, which is scoping, where you're developing a hypothesis exactly like this. Should we design cars that have second lives? And there are some manufacturers who don't do this. Should we look at different kinds of powertrains for a different portfolio of cars?
• As a product manager, you’re trying to minimize the number of moving parts to maximize the applications. You don't want to create a new battery for every single kind of car. You want to try and standardize as much as you can. It's not always possible, but the hypothesis is going to be things like, can we get a 1000-kilometer range? Can we get 20 minutes charging? How many years can this car run? This requires lifecycle thinking as we described.
• As a battery manufacturer, the person who's making batteries is not the same as the person who's making the power tool or making the car. You're designing for something where you may not know where this battery is going to end up. And that's where lifecycle thinking helps consider the different scenarios and the hypotheses that you're creating.

Shelley - I like this point that I hear you both alluding to, which sounds like, use sustainability as a lens for identifying opportunities. [14:41]

What is one other point you can highlight to our listeners about what is essential to take away and think about for these stage gates and how to embed sustainability?

• Neil: In these two cases, one of the best tools is to be quantitative. I have an opinion around paper straws. While a paper straw reduces the amount of plastic waste, across every other environmental criterion, whether it's water or total volume of waste or carbon or energy, it's actually the poorer option. Being quantitative about what your hypothesis is and what you want to test is key. [15:05]
• One of the best quantitative tools we have is the lifecycle approach. It's not just giving you the breadth but also the mathematics that allow you to test - is this going to work? Is this the more viable option or not?
• The other aspect of lifecycle thinking, and I'm saying lifecycle thinking, not lifecycle analysis, is costs, compliance, and safety, all require this kind of thinking. Its a very good frame that has come from the sustainability and the LCA community that is available I think is scalable now for product managers to use.
• Jim: The thing I think is critical is to know who the stakeholders are both internally and externally. Initially the focus was about materials, parts and building and selling the product; other people took responsibility further down the product lifecycle. But now product design must deal with what happens when the useful life of the product is over. So, at the beginning you need to identify who will be your partners going forward so there's a company in place to manage the recycling and material recovery. Identifying stakeholders goes hand in hand with the environmental and social impacts that are identified in these early stages. [16:13]

Shelley - Great points to leave our listeners with. Be quantitative; figure out who your stakeholders and partners are; and use sustainability and lifecycle thinking to be the lens for how you discover opportunities. [17:28]

Links to Things We talk about

• Inflation Reduction Act: https://www.whitehouse.gov/cleanenergy/inflation-reduction-act-guidebook/

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In October 2023 California’s Climate Corporate Data Accountability Act (SB 253), which directs the State Air Resources Board to develop regulations requiring corporations that do business in California, with annual revenues over $1 billion, to publicly disclose their GHG emissions, was signed into law. 

In this episode, we discuss what this legislation means for product managers and individual products. Are we going to start to see product-level impacts become enterprise-level reporting? And what steps can product managers take to align product-level impacts and reporting to corporate goals? 

Listen to find out more.

In This Episode

In a moment we're going to look at California's new Climate Corporate Data Accountability Act which includes scope 3 greenhouse gas reporting starting in 2027. But first, I want to explore the difference between corporate level reporting and the environmental impact reduction and reporting that happens at the product level. [00:05]  

• Neil: A good frame to do this is the what, the who and the why. And if you look at how companies take raw materials, create products and sell it, there's many standards and different aspects you need to report on that are covered by the Sustainable Development Goals. You have standards like the GRI and SASB and so on that are out there that help create the construct on how to report on the operations of business. [00:51]  
• To understand who's the audience for these kinds of reports, it is typically governments where you're reporting into a kind of platform when it's regulated. Investors that look at these reports when you're looking at investor reports or sustainability reports and NGOs take particular interest in too. Customers, indirectly, through the brand that you create and how you position yourself as a company in terms of being sustainable. [01:25]  
• The reason why companies do this is it provides a platform to operate. Sometimes - it is around regulations - if you did not report you would not be able to operate in that particular jurisdiction. It’s a way to control how businesses operate in a jurisdiction. [02:05]
• On the product side of things though, it becomes very direct. If you look at what a company is, it is about making products and making them better than competition and selling them for a price that customers will buy. And in this case a product level declaration from a sustainability perspective addresses that product and how it can be positioned against competition in a better way. [02:25] 
• If you're looking at who's the customer, there isn't any regulation to date that covers product regulations. I think there are some. When you're looking at the digital product passport in Europe, the recycle content in packaging in several places in the US. But there's nothing broad that operates at the scale that you typically see corporate reporting standards and regulations. They are very dedicated to customers. They're creating a differentiation against competition so that customers choose your product as opposed to others. Therefore reporting in terms of EPDs or lifecycle assessments or ecolabels are a key differentiator there. [02:46]
• I think it is important to keep in mind that for the vast part, product managers have never had to worry about corporate level reporting because this is something that sustainability teams and investor relations teams take care of. Whereas a product manager needs to care about product level reporting, because typically this comes out of their budgets and their accountability. [03:34]  

Jim, do you have anything to add to that? [03:58]  

• Jim: I think there are different purposes. The purpose of corporate reporting is really to look at the overall carbon footprint or broader perspective to comply with regulations or stakeholder brands. There is a lot of interest in the investment community now in some of that. [04:01]
• But when you get into the actual individual product, you're dealing with collecting early information, in this case greenhouse gases on the entire product footprint from raw materials, acquisition through use and some kind of end-of-life management. So, there is an entirely different focus between the two activities which as Neil said, is not really tied back to a reporting requirement. But it is tied back to customer and consumer expectations in terms of what are they looking for in the products they buy based on a reduced carbon footprint. [04:18]
• There are differences. Both are important. And as things evolve, we're going to see them come closer and closer together, where the product manager and the activities in the innovation and stage gate process are going to have a greater role to play in helping the company at the enterprise level meet their corporate greenhouse gas reduction targets. [04:48]
• The product component and the product manager's role are pivotal to help the company meet their greenhouse gas reduction targets in some of these requirements that we're seeing but also lay the foundation for improving the overall performance of the company. So that's what I see between the product and the enterprise level. [05:32] 
• Neil: To add to that, traditionally scope reporting has been about the operations, and if you look at GHG, there's a GHG protocol that breaks this down into scope 1 and 2. So, scope 1 is things that you burn gas on in a CHP to produce electricity and heat. Scope 2 is you're using electricity to make something. So, you're buying energy from someone else who does that burning of fuel for you. And then there is scope 3, which is all the materials that you buy; the non-energy related stuff you're buying like steel, copper, plastics. [05:52] 
• This is where scope 3 comes in and where product and corporate start meeting is this realm of scope 3 because your scope 3 impacts are primarily determined by the products that you make. And this is where you see the bridge coming back between product and corporate. [06:36]  
• Jim: Scope 3 has both upstream and downstream, but the upstream is your suppliers. When a product manager and the product manager's team lay out a new footprint for a product, they're going to have to pick materials and then suppliers. So now procurement is going play a key role in helping the company understand their whole greenhouse gas emissions on scope 3. But even more importantly from the product level is that product goals are going to be based cradle-to-cradle, cradle-to-grave lifecycles. [06:54] 
• Neil: And even if you didn't care so much about the materials that you're using, scope 3 has got 15 categories and one of them is largely driven by your products and how they're used in the world. If you're oil and gas producer, there's no real impact in extracting oil from the ground because the major impact actually comes from burning that. And now scope 3 plays into that because you need to now report on it. And this is where product managers and their role in creating products that are more energy efficient and have lower impacts also becomes public information through scope 3 reporting at the corporate level. [07:35] 

Let's look at this in the lens of the new legislation that California just passed. In October of this year, California introduced the Climate Corporate Data Accountability Act, essentially requiring businesses with over revenue of 1 billion to report their greenhouse gas emissions, starting with scope 1 and 2 emissions in 2026 and adding scope 3 emissions in 2027. What is the relevance of this legislation for product managers and individual products? [08:18]  

• Jim: The significance is that now you've got a requirement in the state of California that says to do business in my state, you have to report and meet these requirements. And I think that's impactful. But people have always said when we work internationally in Europe or in other places around the world or even in other states, is the influence California has had in laying the foundation or setting the stage for environmental or sustainability directions by these other states or countries. They've never adopted California's rules by any means. But what California does sets a vision and leadership perspective. It has an impact in leading as an example, as a benchmark for other countries to look at to tighten their own environmental or emissions rules. So, with greenhouse gas emissions reporting now coming out of California, I think other countries are going to see that and certainly other states are going to see that, and maybe we call it the California effect - it is going to have a major impact across the US and across the world. [08:44]  
• Neil: It's not to be underestimated what 5000 companies mean. That's a significant portion of the most powerful companies that operate from outside the world but operate in California. And so whether the rest of the world follows or not, or the rest of the states follow or not, it doesn't matter. The fact is they will have to comply with these regulations if they do enough business in California. [10:28] 
• But I think it's important to keep in mind why this is so serious. There have been scope 1 and 2 regulations that have been in place. The European Carbon Trading System, the ETS system has been in place for more than a decade now. This focused on scope 1 and 2 emissions from factories. But in the US, for the first time, you have to start reporting in 2027, but based on 2025 data for scope 3 data. [11:00] 
• What you also need to keep in mind is that this needs to be verified by a third party. This is not something you can write yourself and publish, like what companies have done in the past when it has been voluntary. This is public information that you will put into an online website that people can search and compare against your competition and against others in the industry. [11:38] 
• Why this is so serious is it takes 24 months to set something like this up for a large company. I've done this for the last 15 years and it's not trivial to set up a reporting system for scope 1, 2 and 3 for a large organization. And it's a 500K fine for misreporting and while that doesn't seem like a lot of money, this goes on your public profile. [12:16] 
• The same thing is going to happen just like what the SEC did for financial reporting in the 1930s, where the whole world now moves around, and our business plans are catered to the report that goes public. [12:55]  
• It is important for product managers to care because they control the lifecycle of their product that is then translated into the scope 3 report of the company. So, for the first time in history, I would say a product manager now needs to start caring about what's happening in the corporate report. And I think for the first time, people will start looking at the product manager to say, hey, what's happening here? And how do you make this better? Because we see how the others are doing too, in competition. [13:45]  
• This is this principle I like to get people to think about. If you were to live in a house made of glass, you behave very differently in what you do and how you react. And that's what this regulation is doing for product managers and for companies. They're putting everyone into this glass house. [14:14] 

What steps can product manager take to anticipate this growing focus on scope 3 emissions and how they need to care or align with corporate reporting that we're seeing here? [14:39] 

• Neil: I think scope 1 and 2 will be covered by sustainability teams, investor relations teams within companies. I think the GHG protocol started with a scope 1 and 2 standard in 2001, so almost 22 years now. I would say there is not a lot of chaos that will ensue from this for scope 1 and 2. [14:54] 
• But in terms of scope 3, this is relatively new. The standard was released in 2001 and not a lot of companies have done this well because there's a lot of flexibility that is provided and there's a cascade according to the level of granularity that you need to use to be able to create an adequate scope 3 report. The first is you need to know exactly what the product is and what the supply chain is and it's called activity-based modeling. So knowing what is happening in the supply chain or in the value chain of your products that you're selling. The second is if you don't have this information, for example, you don't have data from suppliers about the environmental impacts of the products that you're buying, then you could use average data. And then when you don't have data for this, even when there is no database that allows you to estimate what the impact of a particular raw material is, that's when you can use a spend based approach. As you imagine things become fuzzier and less useful as you go down this hierarchy. As a product manager, your only lever for change is if you understand what's really going on in the supply chain. [15:15] 
• Product managers will not just have to look downstream of their product, but also upstream and mapping out this supply chain and understanding how their products react downstream. The use-stage of a product is going to be key for them to improve. I think average data as well as spend-based data do not help product managers change anything. The only thing you can do is buy less and sell less, which nobody wants to do. [16:47]
• Jim: When I first got involved in the lifecycle field years ago, there was some initial work that demonstrated that during the product design and development stages, traditionally when decisions are made (the materials selected and where they get the materials) created and addressed 80% of the product's total lifecycle cost or impact. [17:23] 
• As Neil said, scope 1 and scope 2 are primarily related to manufacturing and operations. They found that 80% of the time, management efforts were spent in manufacturing and operations, which only represented 20% of the value creation/impacts. 80% of the opportunities is upstream where you can look at all the suppliers, materials, and where they come from and then the downstream aspect of it. [17:55] 
• That's why I've been focusing on the stage gate process, product design and product sustainability, as opposed to corporate sustainability because it's at the product manager level, it's at the design and development level that the company can identify where the hotspots are, both upstream and downstream. [18:40] 
• In terms of driving corporate sustainability targets or greenhouse gas targets, you need to know what each product lifecycle greenhouse gas footprint is; and that can be rolled up to be able to meet corporate greenhouse gas goals. The product lifecycle related to greenhouse gas measurement and reduction is going to drive the ability of a company to meet the corporate goals they have. [19:11]  
• Product goals are going to be a major enabler to help the company conform to their total greenhouse gas corporate goals. And the product manager is going to serve as an enabler to manage changes throughout the stage gate process to reduce greenhouse gases. They are going to provide 80% of the data that are required based on the product impacts both upstream and downstream. [19:50] 
• Going forward, I see the product manager having a pivotal role to ensure the company can meet the overall and individual greenhouse gas goals to create a competitive advantage. It's an opportunity for companies who are leaders and for others to get on board and become more proactive in the sustainability and greenhouse gas field. [20:25] 

Links to things we talk about:

• EU Emissions Trading System (https://climate.ec.europa.eu/eu-action/eu-emissions-trading-system-eu-ets_en)  

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It's not enough to just make a product more sustainable. At the end of the day, you also need to capitalize on that sustainability improvement because it’s an investment. 

In this episode, we answer how understanding the six stage gates to developing any product is essential to leverage sustainability improvements. We also discuss using single sustainability scores, trade-off and decision-making hierarchies in organizations, and why life cycle thinking is essential to not lose customers in today’s market. 

In this Episode 

Neil, as a product manager, how have you seen sustainability embedded into product development? 

• Neil - I have been a product manager for software. So, it's slightly different than when you're looking at physical products. But I think more of my experience has come from my work with product managers and engineers in the manufacturing space and that kind of formalized itself into a bit of a product management structure that I think would be good to explain to answer that question. [00:36] 
• If you look at the toolkit of the product manager there are six stage gates to developing any product. It starts with Discovery, where the goal is to find ideas. You could be looking at new technology on the market, demographics (who is buying what). There is a big green trend that has been going on for the last 20 years and is increasing. [1:01] 

• Product development is a messy process. There is no straight line. But I’m trying to create these buckets [stage gates] that describe this process, starting with Discovery, where you have an epiphany that could help your product or business. [1:30] 
• The second stage is desktop research [Scoping phase], which is done mostly on your computer. You are trying to build hypotheses (will it work, is it going to be better, is there a different market to address, is it a bigger market, is it viable?). There is not a lot of team activity at this stage. [1:48] 
• When you are looking at sustainability at this stage, you might do some crude life cycle assessments (LCA)s. [02:14] 
• Example - Consider a new kind of battery that is low weight, high power for an e-scooter or for a more sporty vehicle. Would you be able to create the battery for a vehicle with 1000 km range? You're trying to create hypotheses and ask are people going to buy it? Is this even technically viable? Have people done it before? [02:25] 
• There's a lot you can see about what is already available in the Scoping phase. It doesn't make sense to create a new battery if your main market segment right now is the Middle East or China. These things are not obvious. You may say it's a battery, it must be better, but that's not always the case. When you look at it from the entire lifecycle, the biggest impact from a battery comes from the use of it when you charge it, and the kind of grid you charge it from impacts the overall performance of that product. Using a lifecycle perspective at this stage allows you to understand and rule out some of these hypotheses that do not make sense. [02:50] 

• The next stage is Business Case. You are looking at it from both a technical perspective (will it work) and from a market perspective (if it were to work, will it make business sense). You might ask: Will it be twice as expensive? If it is a new market segment, will anybody buy it? How big is the market segment? If it’s a new geography, will you be able to address that geography? [03:27] 
• When creating the business case, it is pivotal that you look at the portfolio of products that you're responsible for, and not just an individual product. Because unless there is a big impact to the top or bottom line, you will not get much attention to take this project from the business case to the next stage, where you need to put resources into developing that idea. [03:51] 
• The fourth stage [Develop phase] is where you put resources into developing the idea, and the idea meets reality. When they start to build, many Product Managers realize the materials don't work, the processes that they have or the machines they have don't work, they can't find suppliers for certain materials and so on. [04:22] 
• What's important to consider here is not to stray too far away from those initial hypotheses [in Scope phase], because you have informed those things with lifecycle assessments and with looking at what has been done before. Very often we find product managers will look to solve a problem that they identify, but then forget about the consequences of making that change. [04:44] 
• The next stage is the Testing and Validation phase where you test the hypothetical benefits from taking that product to market and you would test this with market studies. Many companies also look at the stage gates for compliance and sustainability. Do they meet the criteria that would allow them to take the product to market? Both externally from a regulatory perspective but also internally from a company perspective. [05:15] 

• You're doing more robust analyses, slightly more detailed than in the early stages. This is where it becomes more realistic based on the suppliers that you would be using, and what are the real final materials that you would be using and so on. [06:00] 
• The last stage is the Launch phase and it's how you take the work that you've done and position the product in a way that it was envisaged. If this product is using 50% less water or has been created out of 30% more recycled content or is part of a producer responsibility program; these are things you need to quantify, verify, and they become part of the go-to-market. [06:24] 
• This is the frame in which product managers typically look at how they can embed sustainability into products. Sometimes it doesn't have to be a new sustainable product. Sometimes it's just a new innovation or an iteration of an existing product that makes it more sustainable. [07:02] 
• But it's not just about making that product more sustainable. At the end of the day, you need to capitalize on that sustainability improvement. You need to consider how to leverage that because at the end of the day it is an investment. Otherwise, you probably would not have put in that time. So, what is the additional benefit that you get? And I think that's how each of the stages give you the opportunity to be able to leverage that work. [07:23] 

Neil, you have mentioned in the past that the product manager may not be responsible for the sustainability aspect in each stage gate. What might be relevant to consider for walking a product through its stage gates and how that sustainability metric or responsibility gets passed to different product managers? [08:00] 

• Neil -The product manager's ultimate goal is to make trade offs, and trade offs happen at different product levels. Products are also typically seen in the context of which portfolio they fit into. Large organizations who are not just building a single product tend to be more complex, and so the products also belong to a bigger portfolio of products. This is where I would say you have different hierarchies of product managers that are making decisions at different levels. [08:37] 
• Should I use material A or material B is one such thing. Should I choose to make this kind of product that is part of my portfolio or cycle it out of that portfolio is a completely different question to answer. And that's above certain people's pay grades. I think the only way to do this is to set the right goals and have the right mechanisms of measuring improvement at any of these levels, and Jim has a lot of experience in this field. [09:10] 
• Large companies right now, especially in the automotive space, are transitioning more of their portfolio to electric and alternative fuels, and they're reducing their Scope 3 environmental emissions for the entire corporation. Not by changing existing products, just by adding new products to the portfolio and cycling out old products. This is one way to improve sustainability of an entire organization without changing an existing product at all. [09:39] 
• You also see companies fixing the products that are currently in the market because that makes the most business sense. These are different levels of decision making that typically are not in control of an individual product manager. [10:11] 

• The other aspect of this is some decisions are very operational. What kind of material you use will decide what kind of manufacturing process you can employ. If you're using machining or if you're using a casting, the amount of material you need compared to the amount of waste you produce for each product step is hugely different. Often product managers stay out of this because you have engineers to solve this problem and they give recommendations on what's the best way. [10:25] 
• The recommendation I have is to use the same metric across all decision-making processes, whether this is carbon, water, or recyclability. There are even aggregated metrics, normalized metrics, called single scores, that allow anyone in the organization to evaluate any decision they make across this single score. There are several companies in the consumer goods space and in the automotive space that are trying to do this. [11:00] 
• Water and carbon are two distinct metrics that are used more often than others. Look at any product decision across the entire lifecycle and ask, ‘what is the carbon impact of this change across the entire lifecycle?’. You can use this same decision metric across any level described until now. And its important to have that same metric so you can compare a decision: should I change a screw, or should I rip out the entire chassis? And I think the difference to the sustainability impact will be determined by this metric at any of these levels. [11:33] 

Jim, with your experience with sustainability and setting the right goals across an organization, did you have anything you wanted to add to that? [12:14] 

• One thing when you look at setting goals is to look at the consequences and the benefits of meeting those goals. [12:24] 

• One client who was part of Product Sustainability Roundtable, was very interested in getting a position in the green building sector. But they didn't believe that the green building sector was going to add sustainability or environmental metrics to their decision-making for selecting suppliers. They just didn't think it was the time, it wasn't relevant to them, and they ignored it. The consequence was they lost that work. [12:51] 
• The product manager and the people who are interacting with the customers need to understand those issues and the decision-making criteria that the client is using to make decisions. In the example where they lost a customer, they could have increased their positioning with the customer by adding sustainability metrics to their innovation process. [13:21] 
• There's a chemical company in Germany we worked with and for quite a few years they had been a leader in the sustainability area with eco efficiency, with sustainable portfolio analysis and looking at sustainability issues associated with the products, materials and chemicals they sell. A lot of times they were ahead of the time; only a few customers asking for it, but they would promote it. But now that clients are beginning to want sustainable, lower carbon footprint chemicals or to use less water, they are well positioned because they've got the tools. They've done the embedding. They've done the training to get the innovation team and the engineers fully aware of what the lifecycle sustainability metrics are, and the value they can bring to the table. This is an example where being prepared, building the tools and building the understanding of how the tools are used, and how the information can be used in decision making are all tied back to their overall target. [14:00] 
• One of the dilemmas trying to move forward and being innovative in the innovative stage gate process is resistance to change (e.g. I've been doing it one way for 20 years). When new technology and new material come out, someone who has been in the field for 15, 20, 30 years, are used to dealing with certain materials. So, you need to see how that impacts that person's resistance to change. How does it impact his or her actual performance and job or bonuses? So, you can bring it to that level of connectivity. [15:20] 
• Another issue is the complexity of implementation, and the whole decision-making process. Who makes the decision? Is it a product manager? Is it this department over here? Is it another department manager over there? It is a very complex situation in big organizations, whereas in small organizations, there's three or four people and you can sit around and talk. But when a vice president has 300 people, another one has 500 people, it's an elaborate conversation about how you make those decisions and who makes those decisions on a product. [16:41] 

• Neil – Because -it’s interrelated. If you choose a different material or a different supplier, it affects the other business units as well, or could affect it. That's what overcomplicates these discussions and debates very often. [17:14] 
• Jim – 100% right. To give an example we had two clients: one was a supplier of cleaning material for buses, the other one was New York City Transit, which provided buses across the five boroughs of New York City. They had to clean the buses and were currently buying 20- or 50-gallon barrels of cleaning material. The alternative from the supplier was to provide a 500-gallon tote where you didn't have to manage the movement of barrels back and forth and you could clean the buses directly. The dilemma was that the first cost to purchase the 500-gallon totes were high, and the procurement people didn't want to buy it because it reduced their budget and increased first costs. On the other hand, the operational cost was a different manager. And it took a long time to go both up both sides and get to the point where the total cost of ownership of having the tote was better for the company than doing it the old way. [17:30] 
• This is a good example of how the complexity in bigger organizations create time and effort. And in innovation, you don't always have that time. You need to make those decisions quickly. That's why having tools out there now that allow people to get information quicker and understand what the outcome is, is a very valuable process. [19:06] 

Jim, suppose there aren't incentives for organizations or a product manager to include sustainability. Can you describe some of the reasons that ignoring sustainability could be detrimental to a product’s success? [19:40] 

• Jim -A lot of it comes back to the business value. If you don't have a sustainable product, you're going to lose customers. If you don't have a sustainable product, you're going to create a negative brand image. [19:54] 

• And right now, there are a number of environmental and social regulations that are surfacing in Europe, North America and Asia-Pacific on products, not just on the operational side. You're going to be out of a market if you don't understand what these are and comply. The US recently put a proposal out that they're going to purchase environmental and sustainable products and services and it's going to be impactful. Neil: the US government – the largest single buyer in the world, is going to mandate sustainable procurement. [20:10] 
• Jim -The sustainable product procurement proposal is as equally as strong as the EU's Green Deal program. So, there's two regions of the world that have committed - and it's not just a business-to-business conversation now it's actually the government, which are huge procurement buyers - to buy greener, more sustainable products. That's probably one of the biggest benefits to embed sustainability into the stage gate process: you're going to be well positioned to compete in all those marketplaces as you go forward. [20:52] 
• Neil -Ten years ago, there weren't so many examples of companies that lost out. There were lots of companies that gained from sustainable products. You had entire brands that were created around sustainability, and they did really well. Five years ago, in Germany the bio-based products and organic product lines across different brands were the fastest growing segment out here in Germany and Europe. [21:35] 
• But in recent years you're seeing customers losing because of it. And if you look at how people think it is, if I can avoid losing money, I will pay attention to you much more than if I told you I could make you twice as much more money. And I think this is what's happening more and more. [22:07] 
• We had a customer where they lost not a couple of million, but hundreds of millions of euros just in a single year to competition who could position their products better and who did a better job of communicating what the sustainability value of their products were. And a lot of product managers are learning this the hard way by losing out to the competition. And that's a very easy way to teach product managers you cannot ignore this anymore. When you lose hundreds of millions, it becomes very easy to make the case that it is no longer about whether you have the right incentives to do it. It is you will lose if you don't. And we see this happening more and more now. [22:29] 

• Incentives was a problem five years ago and I think in certain places it may make sense where the market is not as demanding, like the consumer goods space, or whenever you have public procurement playing a huge role in a company's future. Or in B2B businesses, where you have a big split in terms of the end consumer who is willing to pay more money for sustainable products or who would go out of their way to buy more sustainable products. Maybe there's a bigger split there. But if you're looking at B2B, there is more pressure - sometimes self imposed, sometimes based on the industry itself - on companies, large companies. Think of the big brands - Apple and Microsoft - and these kinds of brands where they have immense pressure to demonstrate sustainability and therefore, they show that in what they buy. [23:19] 
• If you are a customer of these kind of mega brands, you will lose out if you do not have the more sustainable product, or at least can demonstrate that you are working towards sustainability in your products. And this is what has changed in the last three to five years, where this pain has become much more than what was before. It was previously just an opportunity. Now they're starting to become pain. [24:14] 
• Jim - Following up on the example I talked about in the Chemical company. They were prepared to get the internal know-how and experience and understand what sustainable metrics are related to their products. And they got some uptake. But it wasn't until the customers started asking (and the situation was B2B) that they were able to respond immediately because they had the internal tools. [24:42] 
• There's being proactive and not waiting for it to happen, but being proactive and anticipating is another activity. And we've seen this a lot with companies as part of their strategy: we're ‘just going to be a compliant’ strategy and do whatever the government tells me to do. But then all of a sudden, the government requires you to do all this stuff to be able to sell in the country and you're not prepared. Or you say, I'm going to wait for the customer. But you don't look at it proactively. You don't have a system in place to really check with customers about what they're doing. [25:08] 
• Neil - We see this so many times. If you are going to address the situation when a customer asks for it, then you've already lost that customer. Because the answers to these questions don't come from one day to the next. It takes a couple of years to get things in order so you can respond to a customer. I think in B2C this is different - you need to have it in advance of the product going to market because it determines how you position it and how customers buy it. But in B2B, it's a salesperson. It's an account executive that is responsible for positioning that product with a customer. And if that person doesn't have the information they need to win that deal, then you've lost that customer. [25:40] 

• This is one of the reasons why the same customer – and I think I know who you're talking about - they are killing it in the market right now, because they're just ready with it. We speak with customers who are more downstream from the chemical producers, and not all of them but several of them, are not considering manufacturers that cannot give carbon footprints of their products. They will keep their existing contracts because they need to. But think of this – after five years to cycle out old products (that's usually how long it takes) - imagine you're not doing business with this customer anymore. It takes that long to create your new product and to communicate about it and to position yourselves in that way. So, if you are not doing it now. It's almost always already too late. [26:23] 
• Jim - The thing is a company doesn't have one product manager. It may have hundreds, thousands, depending on how big they are. And there are some customers, as Neil talked about, who are going to be very aggressive and proactively looking for sustainable products to purchase.  [27:18] 
• There are other brands or markets which aren't as advanced. Companies who are leadership companies, and particularly in the B2B space, are beginning to look at portfolio sustainability assessment: how to look at the whole range of products, and the various product managers, with some kind of overall corporate process. [27:33] 
• Clint Eastwood’s ‘the good, bad and ugly’ is not exact terminology, but the products that are really good from a sustainability standpoint are the ones where customers want it; and some are in of middle of the road and some may not be a good sustainability performer. If you begin to put your products into those categories, it helps the senior managers, decision makers, and product managers, with what kind of emphasis to add to the innovation process for sustainability of a particular product. So, they're not doing it in a vacuum but in recognition that they are a part of a corporation where we have portfolio analysis. [28:04] 
• Another direction that is happening and that requires some consistency among the various product managers, is looking at the same basic criteria, particularly in the discovery and scoping stages. When you're beginning to look at what are those hotspots. What things are meaningful to my particular product, which may be different than my buddies’ over there, which is an entirely different business unit. They may have different hotspots, but we can share that information as part of this portfolio assessment. [28:45] 

• It's exciting because companies are beginning to say we've got to look at an entire portfolio, we just can't just look at one product and ‘we're a green company’ because we have one green product. It's the whole portfolio. You want to get to the point where you're driving more and more of your products towards sustainability, and the ones that aren't sustainable or don't have a market, customers and companies are saying maybe I should get rid of that or I need to change that. They're managing the products in an entirely different way. [29:22] 

I'd like to bring in the idea of lifecycle thinking. This is something I've heard both of you mention before, and I'm wondering if with the successes you're seeing, this is something that is being embedded in these organizations, that they're thinking more in a lifecycle thinking way? And for our listeners, if they don't know what that is, Jim - I know you've done a lot of work in your career on this – can you describe what that is and its relevance right now? [29:50] 

• Jim -We've been using the terminology: always use lifecycle thinking and apply lifecycle assessment where it makes sense to do so.  [30:14] 
• In the ideation stage, and particularly in discovery and scoping, companies are beginning to look at hotspot analysis, looking at what are the core key criteria to think about this particular product. It's looking at a broad perspective: where you're looking at lifecycle issues associated with raw materials acquisition, things related to energy and from production, manufacturing, things related to distribution, use and end of life management. But you're doing more lifecycle mapping. You're not looking at it strictly from input/output like you would in an LCA. You're beginning to map this out and look at issues along the critical life cycle stages. [30:24] 
• Lifecycle thinking is a powerful tool for promoting sustainability by providing understanding of broader issues without getting into the traditional input/output analysis that you would have with an LCA. It does give you a good perspective. [31:34] 

• We often get asked ‘what does lifecycle thinking mean to me?’ One thing the specifier looks at is to ask the supplier, what have I done to move from a negative to positive impacts (e.g. water or carbon)? A supplier, on the other hand, can look at customers concerns, corporate concerns, and begin positioning -from a lifecycle thinking perspective - for what material might help meet the customer needs. The engineer -from a lifecycle thinking perspective - can look at what tools and information will allow me to embed life cycle information into my process to help inform decisions and choices. So, it becomes a powerful tool to inform decisions based on best available knowledge, understanding the lifecycle systems and the lifecycle stages and the relevant hotspots associated with that product. And it is used over and over again across many roles within a company. [31:55] 
• Neil - I'd like to add to this idea of thinking about where your product is going to be used and what will happen after that. So, think of a screw. If you want to put up a painting on a wall, you can make this screw out of steel. It's a good material, easy to find, cheap, it's a little heavy, but it's one of the best materials you can use to put up a painting on a wall. [33:21] 
• If you want to put a plane together, you should not make it out of steel. That screw should be made of a very light material. You are a person making screws. Depending on what is the use and purpose of that product - it could be the same dimensions and specifications - just choosing a different material will decide whether you should use it for a plane or should use it on a wall. [33:47] 
• I think this is not always obvious. As a person making a screw, you don't think what the screw will be used for. So, it becomes very complicated when you think in this context, but it's super important because the impact could be the complete opposite of what you're thinking, simply because you're thinking of it in the wrong phase. You may make a small battery because it's the lowest impact, the lowest amount of material, the lowest amount of energy you need to assemble it together. But when you put it into a car, you need to drive that car for 300,000 km, which is the lifetime of a car. I need two or three of these batteries. Therefore, I need to repeat that three times, as opposed to a single battery that I would create that is just bigger and lasts the entire lifetime of a car. [34:06] 
• Thinking about it in this way allows you to understand the implications of environmental impacts, because unlike money that you pay for gas, electricity, raw materials or for labour, it's here and now. But a lot of the impacts that are embedded into the making of a product happen far upstream and far downstream of that activity that you have, and you have control over it as a product manager. And this thinking is important when you're looking at it from a sustainability perspective because you may not be paying for the gas that drives the car, the electricity that's used to charge the electric vehicle. But the way you designed your battery will determine that. [35:26] 

• Jim - The things that I'm seeing now in the marketplace as you start hearing about solar panels and batteries - 10, 25 years later, once the product has been on the market – is there's an end-of-life management issue and a landfill problem. They knew 25 years ago that the lifespan was 25 years. But you can address that in the innovation stage by flagging that as a hotspot to be managed and get to the point where you've identified the right parties and stakeholders who could manage the end of life for that particular product early on and establish business relationships. So, when the product's useful life is over, there is infrastructure and ability to recover, reuse, and recycle; whatever the right end of life management solution is for those particular products. [36:06] 
• This post-launch aspect is another element that complicates innovation. What happens when the useful life of that product is over and how and who manages that?  It is another whole conversation. But it’s happening because we're getting examples of products who've been on the market for a while and their useful life is over, or at least for that particular model. So, that's becoming part of many, many conversations right now - how to best handle that. And it needs to be, from my perspective, handled as part of the innovation process. [37:02] 

Links to Things We Talk About 

• Scope 3 Emissions, Corporate Value Chain (Scope 3) Standard by the Greenhouse Gas Protocol 

• US Government announces sustainable procurement 
• EU Green Deal Program 

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To read about who you are listening to, visit fivelifestofifty.com and click on our bios. 

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It is crunch time for the climate, and you need to create a sustainable product. But what is that? And is focusing on carbon enough?

In this episode, we answer what is a sustainable product and why your “sustainable” product may not be sustainable tomorrow. We also discuss why narrowly focusing on carbon is an oversimplification of sustainability and what could differentiate a great product manager from a good one.

Episode Notes

What is a sustainable product?

• Before you can understand product sustainability, you need to know what sustainable development is. It’s more than just an environmental and carbon issue. Recall the Brundtland Report in 1987. [0:50]
• Product sustainability minimizes the negative impact of a product over its lifespan. And it’s about translating product sustainability (social, environmental, economic) into business value for the decision-maker, such as improving the brand, growing revenue, reduce cost. [2:23]
• Governance is foundational in a product sustainability program. You need sustainability metrics that are critical for the category embedded into the innovation/product development process, and the product manager plays a key role. [4:20]
• A sustainable product is something that you should be able to produce in perpetuity, and there is no such product because what is sustainable changes over time; things like the availability of resources change, society and customer’s values change, and technologies change. [5:19]
• The definition of a sustainable product today may not be sustainable tomorrow. For example, diesel versus electric cars. You also cannot forget about the aspect of where a product lives across its lifecycle. [6:45]
• Carbon is not a de-facto standard of what sustainability is. Carbon is a simplification and an approximation of sustainability. But there are things it cannot cover in its approximation, such as societal damage, regulations, and harmful substances put into products that could be detrimental to health. [8:20]
• It’s important to understand the multi-criteria view of sustainability, and because sustainability changes over time, it’s better to define products as a more sustainable option rather than a sustainable option. As Jim has been known to say, “There is no such thing as a green product, just a greener product.” [9:00]

What is the risk of narrowly focusing on carbon as an approximation for sustainability? [9:45]

• Some things are correlated to carbon, and others are anti-correlated. [11:00]
• Carbon behaves differently across the lifetime of a product – from the way it’s manufactured, used, and at the end of life - so looking at carbon across different stages is crucial. It’s more than just looking at one parameter but looking at it across the lifetime of a product. [11:30]
• For example - using cars and lamps as how a product used by two different people in two different countries will have a different life, and the tradeoffs are different. [12:10]
• Neil – India did not have consumer packaged goods, and then overnight, they were introduced from Europe and the US, and there was no concept of what to do with the packaging, and India became a big polluter. As a product manager, you need to consider how your product will live when it goes into the market and consider that in the design phase. [13:47]
• When you listen to the global conversation on climate, you hear questions about resource consumption or water use and what happens at the end of life. Things are being missed if you only focus on carbon. A recent CBS news article shows that solar panels and windmills are now ending up in landfill. We knew these would need to be handled at the end of life 25 years ago when they were being designed and brought to market but reducing carbon was the priority; not handling these materials at the end of their lifecycle. This is an example of the risk of only focusing on carbon. We missed a series of impacts that are a problem today. [14:40]
• Is not knowing 25 years ago an excuse? Or is it someone else’s responsibility in the future? No, it’s insufficient and inadequate to think this way. You need to start thinking about what and who to talk to, to put the infrastructure that is needed in place to deal with products at the end of life. [16:40]
• The product manager needs to consider this at the beginning, but the responsibility is not 100% on them; it is also about product and producer responsibility. They need to identify where the problems might be in the future and reach out to multiple stakeholders to build an understanding and to identify what will be the future infrastructure needs and business models. [17:40]
• It is crunch time, and the advantage we had in the past of having time to find a solution to the problem is gone. But the roadmaps that countries have are more evolved than they were 30-plus years ago, and if you look at them (e.g., EU, USA, China), they will give you a good picture of what key priorities your products need to consider in the future, such as water. There are simple frameworks too – Sustainable Development Goals, PEF (Product Environmental Footprint) - to give more direct guidance to manufacturers and product managers to help decide whether one design is better than another and will be more successful today and tomorrow. [18:40]
• Good product managers think in terms of successful products, and great product managers think in terms of successful product lines. What is the next product going to be in this direction? That is the bet you are making. If you use the roadmaps (of countries) and juxtapose them with what your long-term product roadmap, it will give you an advantage. [21:30]
• Innovation is already starting with these roadmaps, and many cradle-to-cradle examples are more accessible now with social media and AI. [22:00]

When a Product Manager goes back to work this week or next week, what is one key shift in thinking you want to leave them with? [24:15]

• Jim – To begin to do things differently and scale product sustainability, they need to ask broader questions that relate to the social, environmental, and business values of each stage and decision, and there are frameworks for that. They also need to understand what the roadmaps are for the product and category and who the stakeholders are in that value chain that they need to build relationships with, and those could be internal or external to the company.
• Neil – I was a product manager for a large part of my career, and most of the time, I wasn’t a great one. Most of the time, I was looking at this year’s roadmap, and at best, I looked at a three-year roadmap. A good exercise is to ask what product you will want to take to market five years from now because that is how long it is going to take to make it. This is when the inception starts. You need to try and predict what the world will look like five years from now in terms of demand, regulation, competition, and what is important to society. Is the priority still carbon, or is it now water? We now have countries putting vast sums of money into addressing water. What are the key design criteria of that product?
• Jim – One more thing on the product line aspect is to ask, who are the additional people you need to collaborate with inside or outside the company; because it’s not just design, it’s also who you need to collaborate with to make all this happen.

Links to things we talk about ⬇️

• Our Common Future, Brundtland Report
• CBS News Article (May 1, 2023): A black eye for green energy? Renewable energy growth brings mounting waste challenge
• EU Environmental Footprint Methods, including PEFs

Who’s talking? ️

To read about who you are listening to, visit fivelifestofifty.com and click on our bios.

We want to hear from you

Is there a topic we didn’t discuss enough, or do you think we missed it entirely?
Do you have a story about how you are using what you heard?
Is there a question you would like answered?
We want to know! Write to us at contact@fivelifestofifty.com