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Tech for Smart Sustainability: ESG Metrics

While attending this year’s Bloomberg Sustainable Business Summit, Ethisphere Executive Editor Tyler Lawrence had a chance to talk with Hewlett Packard Enterprise’s Chief Sustainability Officer Chris Wellise. The conversation touched on HPE’s innovations towards a circular economy, the challenges of reducing environmental impact in the supply chain, and the future of ESG metrics for investors.

Tyler Lawrence: Can you give me a brief overview of your role at HPE and where you sit within the organization?

Chris Wellise: I’m the Chief Sustainability Officer, and within the Office of Legal and Administrative Affairs. There are multiple organizations linked within sustainability— the Office of Ethics and Compliance, the operational team, the corporate affairs organization that I sit in, as well as procurement.

TL: We’re speaking at the Bloomberg Sustainable Business Summit, where we’ve heard several conversations around the notion of the circular economy, which I know is something that you’re also thinking about at HPE. Can you tell me a bit about the principles of the circular economy and how you’re putting them into practice at HPE?

CW: The circular economy is really about reducing inputs associated with manufacturing products, extending the lives of products, and also thinking how one might be able to up-cycle those to a higher or better use at end of life. But, in technology, there are even broader implications. How do you remove what I would call “resource leakages” from systems in other verticals—For instance, the use of industrial technology for collecting data, and then using that data to dematerialize the manufacturing process.

TL: Tell me a little bit more about that.

CW: So when I think about what we do in the IT space, I often think about things in two buckets. I think about sustainable IT: how do we design our products for the environment? How do we design them for circularity? How do we design them for disassembly or recyclability or extended use? And then in the second bucket, I think about IT for sustainability: how do you then apply technology to other industries to improve the sustainability or resource efficiency within those other industries? Closed loop manufacturing is a concept that’s been around for decades and decades, where you essentially look at data collected throughout a manufacturing process, and then you’re able to improve efficiencies throughout that process.

But now with the advent of machine learning, advanced analytics, and high-performance computing, you can do this within seconds. And one of the benefits associated with doing that, is you can look at production processes and reduce or dematerialize the amount of material that goes into a product based upon those data inputs. So, that’s kind of connected to that circular economy concept.

Within HPE, the concept of the circular economy has been around for about 40 years. Since 1992, we’ve had a design for environment program at HP, prior to the division into two companies. And really that’s about how do you design out waste, how do you design out toxic materials while maintaining the performance of products, and how do you design them for recyclability and disassembly at end of use. Those concepts have really been in practice since the early nineties at our company.

TL: And would you say that since HPE has had this focus going back to the nineties on your own processes, does that now help you, in terms of your ability to attract customers for the business of applying your machine learning to their processes?

CW: I would say it works in a couple of different ways. One, we’ve got cutting edge technology, which appeals to customers looking to take advantage of technology in a new way to transform their industry. But also, one of the things we’ve done with my team is developed sustainability sales enablement practice. Because we’ve been doing it for so long, a lot of our partners and customers came to us and said, “Look, you guys have been involved in leading carbon targets for decades. You’ve had leading supply chain related requirements for your suppliers in terms of things like forced labor, conflict minerals programs, et cetera. Why don’t we collaborate so you can help us to understand and share those best practices?”

And what that does is strengthens our relationships through our sustainability-related leadership. Companies want to partner with companies that have shared values. Our CEO Antonio Neri talks about how HPE is really become a purpose-driven company. I think that’s true for a lot of our customers too. And they’re looking to partner with the right suppliers that share their values.

TL: Pivoting a little bit to the question of ESG: over the last few years we’ve seen ESG investing go from being a niche in the marketplace to a cornerstone of many investment portfolios. With that shift, what new questions do you get from investors? What data are they asking for that you’ve had to learn to generate as a company?

CW: The benefit to having been in the sustainability space for a long time is we had a bit of a head start. One of the things we did in our sustainability report, which we call the Living Progress Report, is  developed a data summary, which really helps investors digest the data that they need. What really started as corporate citizenship, and then sustainability, has emerged into now this ESG space. How do investors evaluate potential in their investment-making decision protocol using real KPIs? We’ve had a very robust set of assured data within our sustainability report for years. But within the last 12 to 24 months, there’s been an increase in questions around things like TCFD [Task Force on Climate-related Financial Disclosures], which is appropriate to talk about here since Mike Bloomberg has been one of the key proponents.

A question that’s come up is, “How are you quantifying climate risks?” But I think while that’s important, what’s perhaps more important from my perspective is, “What is the opportunity?” Not just to focus on risk. What is the opportunity? And in our case, some of the things I mentioned around the application of technology, I think have the opportunity to transform other industries in a way that’s climate smart, and helps transition the globe to a low carbon economy.

TL: If you’re only now seeing an influx of questions around TCFD and other climate risks, you didn’t necessarily have the capacity to answer all of those questions at first. So how have you gone about building capability, both in your internal offices and throughout your supply chain, to collect the data to answer those question?

CW: I don’t mean for this to sound like boasting, but honestly we’ve been a leader in this space for so long and doing it so long, that I think our performance sort of preceded the questions. And it also could be reflective of the fact that IT is a bit of a leading industry vertical. Some of the questions maybe began to hit IT first, but we had also begun to think about these things several years ago.

This last year was the first year that we did report on TCFD, but it’s also the first year we got questions on TCFD. Some of the other KPIs around carbon, greenhouse gas footprint, assurance of our data, labor practice indicators within supply chain—these are the areas that we’ve been working on for a long time and where we had very strong programs, both upstream and within our four walls, for decades.

But what will be interesting is the rise in ESG of investors trying to wrap their heads around what KPIs can help inform their investment decisions. I don’t think that nut has been fully cracked yet.

I think investors are trying to figure out what that looks like. And I think corporates are trying to figure out what that looks like too, how to anticipate what those key KPIs might look like. In some cases, they’re things that we’ve been measuring for years, but we’re also looking for signals from investors too, in terms of what is of primary interest to them. it’s a conversation happening right now between investors and corporates. What will emerge is hopefully the best of how we should perform, and what they’re trying to measure.

TL: Could you speculate a little bit on what the direction that some of those KPIs may be heading is? What do you think you’ll be measuring, and what you’ll be asked to measure, three years from now, five years from now?

CW: I think it really is going to be based on a holistic value chain approach for all companies. One of the things that we’ve worked on as corporate sustainability practitioners for a long time is how we are performing internally from an operational perspective.

But what’s becoming apparent is that very little of our environmental impact is associated within the operational domain of companies, particularly within manufacturing. In our case, it’s about 6% of the impact, which is pretty common if you’re in manufacturing. The majority of our impact is downstream within our products, and the rest is upstream within the supply chain related to extraction, assembly, manufacturing components, etc. So, I think increasingly what investors and everyone’s going to be grappling with is, what does your value chain look like? Where are your material impacts? What are you doing to establish aggressive targets within those areas that have the most significant impact? And then, how are you deriving performance?

That’s the big shift that we’re starting to see. For years it was all about having an operational greenhouse gas target. Now most of our initiatives are in the supply chain of products. What are you doing there?

HPE has really been focused on developing a first-of-its-kind supply chain target for greenhouse gases. We’re working with our suppliers, 80% by spend, to establish science-based targets, and then also looking at increasing the efficiency of our products downstream, which was where our biggest impacts are, by 30 times by 2025.

TL: Well, thank you so much.

About the Expert:

Chris Wellise is passionate about drawing upon his experience in business and science/engineering to analyze how organizations innovate, develop, and market products; consume energy and natural resources; and produce waste streams, to find ways to bring businesses closer to economic, social, and environmental sustainability. As HPE’s chief sustainability officer, Christopher directs the global Living Progress team, focused on solving social and environmental challenges in collaboration with nonprofit organizations, governments, customers, and partners.

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