Podcast: Strategies for building a sustainable future

In this episode of Great Question: A Manufacturing Podcast, EHS Today's Nicole Stempak talks with experts from BSI (www.bsigroup.com) about the current landscape of ESG, sustainability, and environmental regulations, emphasizing practical strategies for businesses to navigate complex compliance and leverage sustainability for business value.

Below is an excerpt from the podcast:

Nicole Stempak: It's great to have you here. For our listeners, can you please introduce yourself and briefly explain your role?

Shanayia (Shay) Munoz: I can go first. I'm Shay Munoz. I've been with BSI for seven years as a consultant on our sustainability practice. I have a background in environmental science and lead our sustainability strategy and reporting services. So essentially helping companies across their sustainability journey, oftentimes EHS.

Professionals that get tasked with sustainability. I typically start with helping them to identify the issues that are material to their organization based on their operations, supply chain, geography, different reporting requirements they may have, and then help them kind of build practical strategies and the implementation plans by setting goals, prioritizing actions and aligning with their available resources and timelines, and then eventually translating that into actual reporting, whether that's for voluntary disclosures like CDP and EcoVadis sustainability reports or regulatory requirements like California climate disclosures or the EU’s Corporate Sustainability Reporting Directive.

Kimberly Rodriguez: My name is Kimberly Rodriguez. You can call me Kimi for short, and I'm also a consultant at BSI Sustainability Consulting Practice. My background is in business and human rights. I completed my MBA focusing on global human rights and how that applies in the business case, and navigate responsible sourcing programs and help them manage and mitigate human rights and environmental risks across their supply chains.

NS: Okay, so before we do a deep dive, let's take a broad look at the landscape of ESG, sustainability, and the environment. So where do things stand and where are they headed?

SM: It's definitely a rapidly evolving space. One of the biggest shifts we're seeing is from voluntary action to regulatory expectation. Sustainability used to be largely driven by customer demand, and, you know, that's still true, but now regulation is catching up pretty quickly.

We're also seeing a lot of the conversation expand beyond just greenhouse gas emissions, which I think has been a really big focal point. And, you know, that's obviously not going away as well. But we're seeing a lot of companies also starting to focus more on, you know, financial risk and business value, as well as supply chain impacts, especially around scope three, because that can be really difficult to kind of get your arms around and manage. And then also looking into the other types of like resource constraints like water. So it's really becoming much more integrated into kind of the core business strategy and not just a side initiative or kind of like a checkbox exercise.

KR: Yes, definitely agree with Shay. And you know, I think we can't ignore the fact that there's been undoubtedly a lot of movement in the global ESG landscape in the last year and a half, which has been heavily influenced by geopolitical forces. And as Shay mentioned as well, consumer driven forces. I would say the last five or so years since you realized a growth spurt and a number of regulations, certifications, acronyms. It really was like an alphabet soup, I would say. Like, I think everyone was having a really difficult time managing, because also all the letters were kind of the same. So, you know, everyone would be using environmental development, et cetera. So there was an explosion of that.

I think we're seeing a bit more consolidation of these objectives as well into more, for example, standard reporting requirements, seeing things become more enshrined in regulations in either like national or like state level laws. So we're seeing kind of like, okay, here's everything and actually more of a focusing in on what the stakeholders that are affected by these regulations I think we to focus on. And I think despite all of these changes, despite all these different swings, ESG is still really key to a lot of the clients we've been working with. The messaging may have changed along with the current climate, but we found that in at least our day-to-day, there is still a big recognition that sustainability, ESG is a big driving force for better business and for better impacts.

NS: It's so great to be talking with you both in April, which is Earth Month. We've certainly come a long way from the first celebration of Earth Day, you know, with the campus teach-ins across campuses in April 1970, which, I mean, it's hard to believe, but that was several months before the formation of the US Environmental Protection Agency and the signing of the Occupational Health and Safety Act. And it was even a few years before the passage of the Clean Water and Clean Air Acts. What do you think listeners ought to know about the modern environmental movement and other legislative efforts to protect our lands and conserve our natural resources?

SM: It's never been more relevant than it is today. We're, you know, operating in a very fast moving, high consumption world. We're constantly sourcing, producing, and scaling. So being more intentional about those activities is extremely critical today. And then at the same time, it can feel very overwhelming, especially for companies that are really focused on growth. That's where, you know, sustainability needs to be practical and impactful. It's about helping businesses balance environmental responsibility with operational and financial realities. And, you know, regardless of where people stand on the causes, we're clearly seeing more extreme weather and disruption. And that creates real tangible risk for businesses today that they really need to be mindful of and just you need to know how to kind of understand them, manage them, and mitigate them.

KR: Yes, and I think building on to that, you know, think talking about like a very high consumption of society today, I think there's been a movement towards focusing on the circular economy, looking to look at how do looking at life cycle impacts on the products we consume, how we conduct business like there wasn't before, whereas in the past, I think the focus of conservation movements was just to protect our lands, protect their resources. Now, there's a lot more focus on how do we use these resources, how do we ensure that these resources are still there and present for future generations.

And yeah, and as Shay mentioned as well, you know, there's been really extreme climate impacts that we're seeing day to day and that, you know, we can't ignore the science behind these or ignore how they affect so many different communities, whether they be vulnerable communities that have already been impacted by other layers of, you know, today's society, economic, social, etc. And then environmental access is another layer. But just thinking about how do we preserve these resources for the future is, I think, what is becoming really key. And there is a business case for sustainability. I think that that is the recognition of that is also very important that yes, these effects, these environmental effects can't be divorced from how businesses, companies are conducting amid the current operations, and there is a demand for this. Like, I think there's a lot of different reports. I was just at a conference 2 weeks ago at a business school that looks at consumer reports, looks at stakeholder views and sustainability, and there is an increase in demand for sustainable products and, like, real in a verifiable sustainable products.

I think there was a time when greenwashing was, or kind of, you know, when you say you're sustainable, then I kind of the marketing of it was the main focus, but now there's a lot more resources being put in to make sure that your claims are verifiable.

NS: Can you give listeners an overview of what you're seeing at the federal and state level in the U.S. and what you're seeing in other countries too?

SM: In the US, we're seeing a lot of more state level leadership, especially in California with the climate disclosure laws, and then various other states with the extended producer responsibility laws focused more so on material sourcing and waste. And then just continued focus overall on kind of the traditional environmental and worker safety compliance more at the federal level. You know, hoping at some point that, you know, the regulations that are going into effect in California are really focused on reporting your greenhouse gas emissions and reporting on, you know, the risks associated with climate change expand eventually, but we're definitely seeing, you know, in other territories such as in the EU or, you know, many different countries all over the world, it's a bit more aggressive. The EU, you know, has already been rolling out comprehensive reporting requirements like the CSRD. And then there's, you know, many supply chain laws focused on human rights and due diligence, which, you know, I'm sure Kimi can give a great overview about those.

But if even if you are just based in the US and you're a US based company, if you sell into Europe, if you operate in California, or if you're a supplier to any of these large companies that are, you know, impacted by these different regulations, you're likely already going to be pulled into these requirements. It's going to, you know, have a trickle down effect. I'm sure a lot of companies are already experiencing this. So it's really important to be very proactive and, you know, keep your finger on the pulse when it comes to these regulations all over the world.

KR: Nothing much to add there. I think, even though that these regulations are being more aggressive, the EU and Australia and Japan and Asia, we're seeing a lot more movement in those regions of the world, whereas in the US is more state level at this point. A lot of companies, a lot of organizations are still being affected those of other countries, specifically even looking at forced labor. I think that right now the US, like the Uyghur Forced Labor Act, or the UFLPA, is one of its regulations that are consistently applied. And I think does pressure companies to really look at their forced labor due diligence, because if you are founded forced labor from a very specific region in Xinjiang, China, you are not allowed to export into the US and they hold your shipment on the border and they do not let it into US territory, which can have a huge financial impact on companies. So the way some of these regulations are enforced are also very important, I think, to look at and include in a company's response to compliance.

NS: You both have touched on this, which is that there's a patchwork of laws. And so how can businesses make sure that they're following the laws in the states and or countries where they are doing business where they're sourcing materials from to make sure they're not, you know, even inadvertently in violation.

SM: It's best to kind of simplify this process as much as possible. And I'm sure that sounds, you know, impossible potentially when you're kind of just starting to look at it. But I think maybe these three steps can kind of help. So, you know, first is definitely to try to get some clarity on what actually applies to you. So, you know, a lot of companies get really overwhelmed if they're trying to track everything globally. Well, I think it's important to have a global picture of what's going on, but to be working with professionals and experts in the area that can really help you kind of narrow it down for what's applicable to you. And really what you should be looking at is just like where you operate, where you sell and who you supply that should really help you be able to narrow that down and kind of get your arms around it a little bit better.

Second, I would say to map your operations and supply chain. That's where a lot of the risk sits today. And if you don't know where your materials are coming from or where your products are going, you can't really assess compliance. So that's really important to understand your full value chain.

And then third, I would say to build a simple and repeatable process. You don't need, you know, a perfect system on day one, but you do need a way to consistently track these things, especially as it comes to, you know, different ESG metrics. So like energy use, emissions, your materials, supplier data. It's really important to have a kind of, you know, comprehensive platform or some means to be able to track all this information because that's typically a big piece of the undertaking is just managing all of that data. And then, you know, companies that do this well, they really treat compliance less like a one-time exercise and more like an ongoing management system, which is very similar to how safety or quality teams would typically approach this work. So it's really just like an add-on to work. I think that, you know, a lot of folks within the EHS space are already used to, but just kind of adapting it more to like the environmental sustainability world.

KR: I would add to build cross-functionality among all the different themes that Shay mentioned as well, that I think a lot of these regulations, all of these ESG regulations aren't just for the sustainability team to follow. I think that they touch a lot of parts of the business. For example, procurement, of course, and then finance, even EHS, health and safety that may not feel like they need to report, for example, on greenhouse gas emissions. There's data that they have that could potentially support this company-wide reporting.

So I think building on to, yeah, what Shay discussed, I would definitely think about how do you build, discuss functionality and make sure that your teams are talking to each other, sharing the correct data that these knowledge systems or the data is not in silos or or just resides, you know, with one person handling the handling where the data sets and controlling access to that data, because at the end of the day, when you're looking to comply with these different regulations, when you're looking for the data that you need to show, to show compliance, to show movement, to show progress, whatever it is, you need to have this, you know, the right people on your team and to be able to get this across the business quite easily. So I think just making sure that the right people across the business are familiar, that they're talking to each other, and that, yeah, this is really a cross-functional exercise and not just... you know, one sustainability team or one sustainability person.

And I think just to give, sorry, a quick example, actually one of the projects that we're working on right now at a pharmaceutical company, it's a, you know, it's in response to an ESG regulation or, you know, a regulation that would be classified as ESG, but we're actually working with our health and safety team because there's parts of it that they are in charge of. And so, you know, I think sometimes we get questions from. our EHS team, because BSI also has an HS and consulting arm that we do work together with. They get questions from their own clients being like, hey, I didn't realize, but this was a, you know, they're asking something about chemicals or something about this piece of the CSRD requirement. We didn't even know it applied to us. Can you help us with this? So I think just understanding how different functions can work together to respond to these regulations is a key learning.

NS: I'm glad that you brought that up because I did want to ask in your consulting work, where do you see businesses focusing their efforts and attention?

SM: I guess a few big areas that I've seen, and this is really just, you know, probably like the biggest ones that I'll call out because there's obviously so many of them. But really, like greenhouse gas accounting and decarbonization, this has been kind of the front runner and obviously, you know, is still a very big important sustainability issue from, you know, a voluntary perspective, from your customer expectations and what they're requiring for you to report on and now from a regulatory perspective. So really just kind of figuring out the company's baseline emissions and then improving upon that process on an annual basis and then working towards, you know, eventually understanding where your hotspots are for your emissions and being able to then, you know, reduce your emissions as well.

And then another big one would probably be supply chain engagement. So really working with your suppliers to obtain different types of, you know, environmental, social, and governance information from them. So whether that's related to scope 3 and getting emissions data from your suppliers, whether that's getting information regarding different types of materials that you're sourcing, whether it's, you know, focused on the work that Kimi does around, you know, human rights and due diligence, but really just assessing and reducing the overall risk within your supply chain. And then also, you know, regulatory readiness and continuous improvement. So especially, you know, for state level reporting and EU requirements. This is, you know, a big undertaking for a lot of our clients. And so this is something that they have to be very proactive about, ensuring that they're tracking all these different regulations, understanding how they apply to them, and then implementing the systems to then manage them.

KR: Yeah, all of that. And I think we could add traceability as well. I think there's been quite a few traceability regulations and I think how this applies to an organization sustainability commitments has been really interesting. Like I think different companies are approaching traceability differently. Some are just looking at it from a provenance perspective, but there is kind of a lifecycle analysis perspective, a human rights perspective to it as well, a social perspective. So I think that has been an area of growth that we've seen, especially in the last year and seeing how that applies to different businesses and applies to the data source they have has been really interesting.