#10 Turning ESG into a Value Driver: Slok Gyawali’s Approach to Sustainability

Welcome to our show, Slok.

Thank you, Sai. Pleasure to be here.

Thank you so much. Would you start by introducing yourself and how you got from being a journalist to what you do today in the ESG space, driving, you know, risks, or compliance, assurance around it, that’s a huge shift from where you were to what you did to where you are doing today.

I would love to hear more about your journey and why is that that you made this transition?

Well it’s a long story, but I’ll give the short version of it. Well, I’m currently the Director of Sustainability at Apex Companies. We are a environmental and engineering firm, we’re a national firm based out of Maryland, but we’ve got over 70 offices, in North America. I started off in the environmental space as an environmental journalist, that too a part time environmental journalist. I used to be an editor in Kathmandu for a magazine called Himal Southasian , but on the side I would do some freelance, environmental journalism work, writing about conservation efforts, glacier melt, air pollution in Kathmandu and Nepal and South Asia more generally, but I was based out of Kathmandu. And as I did that for a couple of years, I did that in my twenties. I was also at a transitional phase in my life and I wanted to pursue a master’s, but I still wanted to do that in the sustainability climate change space. and I found a very interesting program out of DePaul University in Chicago in their business school, which merged the science side of it, so it was a STEM program, but housed within the business school and I thought that was perfect. So I joined there and the reason that I pursued, career and sustainability consulting is because there were three things in environmental journalism that I particularly enjoyed.

And one was the, evidence gathering piece of it, you know, the data side of it, understanding on what basis are you making a certain claim, that followed by the narrative, the storytelling aspect of it. How do you tell your own story, whether you’re a community, a city, a business, that storytelling narrative portion of it was also very interesting to me.

And third is the importance of understanding interconnected systems. So in journalism, if you are writing a story about let’s say climate change in the Himalayas, via glacier melt, right? That’s the main topic here, you have to understand governance systems, you have to understand political systems, you have to understand environmental systems. So, understanding various systems. Those are the three things that I particularly like in journalism. And I’ve tried to, capture those learnings and bring it to my sustainable consulting practice and so far I think it’s been really helpful.

Thank you so much. I think you hit on a couple of things, one is communicating using data driven, information and to drive your communication, cross functional domains impact, how we kind of present the data, as well as why it is important. It’s not just stating something or saying it, but most based on research and its impact, I think so you’ve kind of tied all those three things very well, to take your next career on. So how has it been from using this? Because a lot of time, when we come into the corporate world, the data that you’re looking for is not available or it is there, but it is not available in the date, in the format that is usable, it’s valuable, or how do you make sense for a customer, for example, you know, because you’re in the consulting space, the end journey is always the ROI, correct? Why am I doing it? And, but as much as you believe in the data, how do you pull all of that together and make sense of it? I think that’s the most critical part of it.

Oh yeah, absolutely is and that’s where you find a lot of our, you know, clients pulling their hair. So I think I have this data, but it’s not in the right format. How do I get this ready to be presented to other stakeholders who want to ensure that this data is decision useful? And that is where the struggle is.

I think, you know, and especially right now in ESG, we are getting to a point in ESG reporting or sustainability reporting, where the rules are being formalized and so we are getting clarity from the market as to what kind of data, investors or other stakeholders are looking for, so that provides some kind of a North star as to okay, this is the KPI I should be working towards and ensuring that the data is clean enough for both for me to understand to map this out internally and for me to present if I’m public facing to present to a public audience and that is where, you know, the work that we do in Apex, but other companies as well you know, there’s an element of being assurance ready with your data that you’re presenting publicly, that becomes very important and Rome wasn’t built in one day and neither was an ESG report so, you know, it’s something that you have to constantly chip at while understanding these market signals of what is relevant to your business context and what is relevant to your stakeholders.

So are there any lessons that you took from your journalism to connect the dots with kind of convincing your customers about what is good data? You know, why is it needed to make the decisions that you’re talking about?

And in your recent past, maybe can you quote something from like, as a news case that you probably would have said, hey the customer didn’t see value in this, but based on the lessons i’ve learned I know, from a journalism perspective, when you do your research and as you said connecting the dots, this is how I was able to help them see that, because a lot of them, as you said, we don’t have a formalized structured regulation yet.

We have some in Europe, we have some in emerging markets. America is still waiting to see what’s going to happen for us. So, we still have to make sense of it, correct? So I think to kind of package it and help them make sense of it, I think there is a lot of goodwill to do it but, the cost, the infrastructure doesn’t exist or there is no funds.

So I think data speaks for itself and maybe kind of helps move through these challenges that you might be seeing in your consulting gigs.

Yeah absolutely, and one thing that I can point towards is let’s say, one for a client. Who is trying to understand waste regulations, but also understand the carbon emissions coming out of waste, right?

So these are two different things, there’s waste and there’s carbon. There was a project in which we had to figure out both and instead of it, what my push was on my team’s push was that these are two separate conversations, you can overlay the data that you get for one to report on two different things. So, scope three emissions coming from your waste, that is one category within scope three, in the greenhouse gas protocol, right. While at the same time, you also need to understand how much waste are your products creating. So this is the same data point you need to address two different environmental questions.

So trying to tell the client that there’s a lot of overlap. So that’s where, you know, I think subject matter expertise comes in handy of where for consultants that work across different end markets is to be able to say that you know like you said, there isn’t a lot of budget.

How do you be resource efficient with the same data point across two different reporting requirements? So that’s one use case where I can see that, you know, don’t have a lot of time, don’t have a lot of people, don’t have a lot of budget, but you have to report because one, your clients are asking for it. You hit again, two birds with one stone in the sense that you need to report this as part of your corporate reporting obligations, but also as part of your ecovirus reporting. How do you do multiple things with the same data point? That is where I think, you know, being resource efficient, being resource driven. Working with a limited number of options, which usually happens in the Global South where I did environmental journalism. I think that’s that quickness, efficiency, resource management, experience comes in handy as a consultant.

Well very well said. So moving on to, you know, from what we’ve spoken about, do you see a foundational ESG, you know, principle of governance structure that you kind of use when we are doing this due diligence and deep dives, correct? because, it’s very fluid market as you said, correct? It’s things are evolving, but using a rule of thumb, is there some guidance maybe you can tell our audience as to what could that be, you know, and how can they start thinking? On the ground, because I think it’s on the spot, we are looking at it like you gave a great example of saying, Hey, this is waste management, but the waste management and the carbon impact coming from four towards scope three. There could be many, you know, use cases that we come across because it could also touch the social aspect of it, because everybody relates to E as more as climate change and it’s the carbon, but there are so many factors that attribute into the E. It could be the waste, it could be the biodiversity aspect of it, it could be the people living there, which comes under the social aspect of it, and the governance of, you know, that you’ve spoken so far about reporting it in different formats for different regulations.

It’s the same piece of data, but you know, kind of massaging it for different aspects. So given that, what is that foundational ESG principle and structure that maybe you have given as a leader to your team to say, Hey, let’s use this and then we expand upon it? Or what has helped you so far?

Oh, wow. I have two, one is Internal and one is External. So I’d start with the External first, you know, my one golden rule to clients when they’re reporting their ESG or starting on the ESG journey, I want to go to a higher level of reporting more advanced. You have to start with governance. You have to get buy in from your C suite. If your C suite isn’t interested, everything that you report will seem superficial.

So whether now, depending on where your company is or what your business context is, if you are a company that has a lot of exposure to, let’s say, human rights or forced labor in your supply chain, or whether you’re a manufacturing company that has water related risk issues, or you’re an IT firm with cybersecurity risk issues, till the time you don’t have an engaged board or an engaged C suite, ESG, will seem superficial if your board is not interested to take those beyond just capturing the numbers phase of reporting, you know, how do you make a real impact? How do you make real change? How do you secure a company drive long term value creation? All of that depends on engagement with the season, so that’s the external facing one. Internal facing I say this to my team, but also to our sustainability or ESG teams that we work with.

Again, I’ve already mentioned this, but it takes time, it is an incremental process, it’s continual improvement, if you think you’re going to report on your, carbon numbers, your social numbers, your supply chain, your governance of risks, create different kinds of environmental policies all in your first go, it’s not going to happen or it’s going to be very, fluffy or shady, whatever adjectives you want to add there, it has to be an incremental, you have to take an incremental approach and it is continual improvement. So, get by in from your C suite and your board for value creation and take this at one step at a time, understand what your materiality is and then focus on those things and build on it year over year.

Awesome, so I think one thing that I would see also is from what you said is there’s a lot of advocacy that is needed, correct? So to kind of education. So in your journey, you know, advising customers as well as building your own team internally. what has your experience been putting these you know, advocacy based on either a use case that you’ve seen or a lesson learned or a need of an hour, or it’s just that, hey guys, you just have to learn this because we’re going ground up, correct? you know, we are not making sense so let’s start from the basics and start doing that evolution that you spoke about. So in your experience, maybe you can point out two or three things that really worked well for you and how did you kind of promote that? How did you help maybe people see that advocacy is needed?

Because I think right now there is, it’s very quiet. Like I came from a security space and we would say, Hey, you need security awareness and people will look at as why, correct? So I see a similar trend in the ESG and sustainability space. So, how do you go about that?

Yeah, you know again, this goes back to the narrative thing that I spoke of earlier as a journalist, and it goes back to knowing your audience.

So, you know, within your buyer profile, within the ESG space, you could be talking to, let’s say, a corporate level buyer, who has to prepare all these reports together. You might be talking to a site level facilities manager who’s concerned about, water related risk at the site level. So understanding who your buyer is going to be important and then telling the story that the buyer needs to hear to meet them where they are as part of their advocacy efforts, right? So you cannot tell the corporate level person that you’re, if you go to the corporate level person and tell them a story of how that one particular site is in a highest water stress region and that is a problem, that’s interesting. But it doesn’t really give them enough ammunition to move or take a decision on that. Similarly, if you go to a site level and say, hey you know, Europe has all these reporting pressures in terms of your ESRS, different kinds of the reporting standard they have out there, and the corporate directive, you need to do like, it’s interesting, but it doesn’t, move.

It doesn’t mean much to them. It doesn’t really doesn’t. And sometimes you get blank stares because you are telling the wrong story to the wrong audience, you know? So that’s how I try to frame it in my mind. How do you tell the story that are these two things connected? Absolutely. They’re connected. Site level is connected to the corporate, the corporate is connected to the site level. So when you’re starting to get engaged in that advocacy. You need to be able to link the site to the region to the corporate, and you need to be able to go top down as a corporate to the region to the site. And that is how I usually approach it, but I’m also a little bit biased because I do more on the E side than the governance side of things.

But again I’ll go back to my golden rule, which is you have to get your board engaged. You have to be able to tell a different story to the board. At the board level, it’s about regulatory pressures and stakeholder pressure, print value creation in the long term. So those are the stories you should be able to tell to different audiences, and I think that helps in advocacy.

Thank you. I think that’s perfect. You’re talking about the right story for the right audience and then connecting the dots together and bring them to see, hey, where do they fall in that life cycle of, you know, whether it’s top down or bottom up, however you’re linking them, they should be aware of that.

It’s just moving a little beyond what we’ve been speaking about. how do you see. Sustainability from a business relevance perspective? When you communicate the business value, correct, for them to address, broader issues like biodiversity, water, and waste management. I mean, these don’t really come directly because as we spoke earlier, everybody clicks and it’s easier for them to comprehend carbon emission because it’s something that they’ve been, I mean, the world has been talking for a very long time, but people don’t kind of tie all of the rest of it, the broader areas of sustainability into what we are talking from an ESG space or from a sustainability space.

And what is its business relevance, correct? Because what is the impact from the business? I think that’s when most actions take place, whether we are trying to say, optimize your process, this is what you can do better. You know, you’re going to be running out of core raw resources for what your business stands for.

So how do you kind of help them build that?

You know, I mean, the first step always is doing a materiality assessment to understand what you need to prioritize and that I think, allows you to make the case for sustainability in terms of relevance to your business, right? So I’ll go to the example if you’re a IT firm your materiality in terms of carbon emission or waste might not be there. It might not be a material issue for you but cybersecurity policies surely are, data security policies surely are, so what within the ESG space is going to be material to you and in ESG we have this concept of, single materiality and double materiality and you know, I advocate for double materiality, which is both impact materiality and financial materiality. Impact materiality being, what is my impact on society, on the environment, on ethics, like what is my internal ethics?

The flip of that on the financial materiality side is, What are the financial risks to my company, to my business, to my, supply chain if I don’t do this, or if these climate change risk, or this social risk thing is made true? Right. So two sides of that of that coin. I would say just understand your materiality and then create your priority list.

Because once you understand what you need to prioritize, it will become way clearer for you that it is not a do good thing. ESG is not a charity. It’s not philanthropy. It’s not being good and taking care of the bugs and bunnies out there. These are real impact that you will face in your business, maybe via a supply chain, maybe more directly.

That relevance to the business becomes way more clearer once you understand what’s the material to your business context.

Very nicely said, very simply said, I should say Slok. I think that’s the, it’s a very nice way of saying, you know, because when people see the words like biodiversity, waste and water.

It doesn’t hit them as hard as when we speak about in the relevance of the business relevance that you spoke about. I think great example. Thanks for doing that. what are the challenges that you’re seeing, in reducing the environmental impact or, you know, the impact from sustainability perspective?

What are some of the challenges that both either you have encountered personally or you’re seeing most of your customers are impacted today, given that we are changing so fast and furious and regs are still very loosely defined, what do you see?

You know, I think one of the greatest challenges I’ve seen is over the last, I would say 10 years, especially five, but definitely 10 years, a lot of companies have made these commitments, to the environment because all they needed to say was, I commit to reducing 30 percent of my carbon emissions or 20 percent of my water usage by 2030 or by 2050.

When the regs weren’t that clear about Hey, can you even commit to this? There’s a lot of greenwashing and a lot of companies did that and now 2030 is what, six years away, not even six, we’re almost at the tail end of 2024. So five years away. And now all these people down chain have to figure out how to hit that number or re do the commitments, right?

So the hardest thing that I’m seeing in reducing environmental impact is making thoughtless commitments. And thoughtless commitments happen when you don’t follow golden rule number one, getting buy – in from your C suite and your board. So that’s one. Second I think, something that we’ve talked about previously is, you know, the rules of the game are still being written, still unclear, especially in the United States.

So people are still like, Should I?, Should I not? Should I wait? What should I do? I think that uncertainty coming from the market also makes clients a bit uneasy. And third is, you know, I think we are only now starting to get a generation of professionals who have climate change, sustainability, social ethics.

Not that previous generations weren’t conscious about these. They certainly were but, they didn’t use the same terminology. Now we’ve got a generation of workers and professionals that understand the lingo and the jargon that makes that communication easy but the problem is we aren’t quite there in terms of corporate decision making power.

So we are still at that generation of climate conscious folks professionals are still climbing that ladder.

So I see there’s a generation gap in communication and decision making. Yeah, you know, and how do you kind of emphasize that? Yeah, it’s true. Yeah, and again, I’m just going to clarify that it’s not that the older generation weren’t conscious about non financial risks, but I don’t think they usually see it in terms of ESG or sustainability.

Because I think the field was not connecting the dots there, correct? Exactly. The risk framework didn’t open it up itself because being a risk management professional myself, maybe a generation before you, it is true. We didn’t have to calculate the risk from an impact of, you know, hey, is the water resource going to be not available or are we impacting our business impacting biodiversity.

So those are risks that are now being accounted for. And it’s a progressive change because we’ve seen the damage and we’re seeing it’s real right now and there’s advisory, like how people like you are coming out and you know, doing that as part of your consulting and advisory. So. Yes, we have to fill in the gaps there.

Let’s put it that way.

Right, exactly and you know, what that does is yeah, like you mentioned, there’s often a disconnect in what we are talking about and how much importance we put to that particular decision point, in terms of, value creation for our own companies. So I think those few factors they’re top of my mind in terms of, you know, challenges in reducing environmental impact.

But what are these strategies now that you have to counter that, you know, as you’ve very well explained some of the ongoing challenges that we’ve seen in the industry. It’s more from even adapting this whole aspect of ESG, thinking about it, setting ESG goals. I’m not even going to the fact of, you know, where we have set goals and we’ve not met. But I think where we are talking about how do you enable them? What are the strategies? Because, we know the challenges. We also know there are some undefined challenges that we’ve not even touched upon. you know, but you might be seeing that because you have a much more centralized view from different diverse industry, different stakeholders that you deal with on a day to day basis.

So, What is your advisory to them? You know, what is good strategy for us to look at say, Hey, let’s look at ES from an environmental impact perspective, reducing carbon, looking at it more holistically, you know, what strategies are working for you and what would you share with the audience?

Yeah, I think starting with, you know, because of that gap in language, I think always start with again, materiality, advocacy and I think at this stage, especially if you haven’t thought about ESG, a whole lot if you aren’t very advanced in the journey, it’s easier to get attention when you talk about risk rather than opportunities, while both are absolutely, essential starting out you to get attention.

Sometimes you have to frame it in terms of risks and impact rather than opportunity. The opportunity is very important as well. So, prioritize your risks to your board, tell the story that is relevant to the listener. Understand what your material risks are advocacy education.

You know, it starts from educating both the board, your C suite because ESG ultimately impacts different areas of your senior leadership, right? It has financial implication, legal implication, it has obviously risk is a key issue, HR implication, brand implications. So you need to be able to sum this all up.

I mean, I don’t envy ESG leads and companies because they have to wear so many different hats all the time and that is because it’s a. all encompassing function so educating at a C suite level, but also educating the different stakeholders within your company itself, right?

Employees have so many different things that they are worried about that has an ESG on the social side. Is your company diverse enough or are you doing your part to ensure that, you know, there’s a fair shot being given to all employees or in hiring. Governance side, do you have policies that ensure that you can bid for contracts?

Now, a lot of companies are asking for certain ESG policies to be put in place before they even consider you as a preferred vendor or preferred supplier, trying to understand the business context of that and then communicating that in terms of risks, impacts, opportunities. Is I think the way to go a lot of advocacy, a lot of prioritization, a lot of communication

very nicely. But thank you. What about measuring? How are you measuring? In fact, and you know, because I think what we do, if it cannot be measured, it’s of no value, correct? We started with KPIs. But measuring impact could be in many ways, correct? If I think KPIs help while measuring maybe the top level, because that’s what they’re looking for to give.

But I would like you to also touch in the example that you gave, you know, if you’re going to a site manager, how do you kind of show them hands on impact? Because I think that is what motivates them to do the continuous improvements.

Yeah, absolutely. I think, you know, the corporate adage of you can’t manage what you don’t measure. It’s absolutely relevant in the ESG space as well and that is why a lot of guidance that is coming out right now out of focuses on materiality. First, prioritize what is relevant to your business context.

And then they’ve also given guidance on what KPIs they think a particular industry should report on given their business context and then report that out to your various stakeholders, so that gives companies some guidance on, okay, so the regulators think or the market thinks that for a company in my industry and SASB has also done this, particular company in this industry, which is the industry that I am needs to report on XYZ and not on ABC, you know, so that already gives you some understanding of your KPIs.

Which the market thinks is relevant for a business in your industry and that investors or the stakeholders are going to be looking at. So that gives you some idea as to what you need to measure. Now, you absolutely also need to see a year to year comparative growth or decline of how those KPIs are trending.

And also do something that I also advocate to my clients is see how you compare with your peers, do a peer benchmarking exercise and see where you are, what the gaps are and how do you at least get to as a first step average and then lead your peer group in a particular KPI.

Those are very good points. I think it kind of brings your internal stakeholder external stakeholder your peers in the industry and where you measure, I think. So you’ve kind of touched on all of those. Very good there. So when you talk about integrating our ESG and sustainability into some of the existing domains. I think we touched upon financial reporting. We spoke about brand value creation as well as impact to the brand and then from a risk perspective. What has worked well, because I know that reporting doesn’t happen always as through ESG as such or sustainability. It could happen through your financial reporting. It could happen through your risk management reporting and there are companies that have set up themselves from a corporate and from a sustainability aspect and they publish their sustainability reports year over year, the larger organizations.

But all of this also, we have to look at the big corporations, we have the midsize and the small businesses, and they may not have the capacity and the resources and even from a scope perspective, they may not have everything correct. So how do you kind of, you know, maybe you can give them one or two tips of to say, Hey, what’s the best way to think about it when you’re integrating something like this? These aspects of ESG and sustainability, and they may be doing it well. For example, they may be hiring globally, they may be hiring a diverse population or they may be buying energy from renewable sources and they may not even know that they’re doing things right. So what would you say there?

I mean, you know, in a lot of sustainability consulting, usually the first step, you need to understand what is material to your company but also once you understand that you have to do a baselining of where you are. If you want to go towards the North Pole, you need to understand where the North Pole is, but it’s also important to understand where you are currently in comparison to the North Pole. So baselining assessment is something that we prioritize, In terms of understanding where you are for your material risks. So now you understand what you need to measure. You understand what is relevant for sustainable value creation. Let’s talk to stakeholders.

Let’s see some of your older policy. Let’s see what you are currently doing. Are you buying renewable energy? Which offices are buying renewable energy? Which offices aren’t? Which offices have a waste recycling program? Which project managers are considering a subcontractor questionnaire that has elements of, Forced Labor Human Policies embedded within their own contracts? Why isn’t this a corporate level thing? So understanding all the good things, the bad, the hurdles it’s very important and that’s why a baseline, engagement where we work with the company to understand what they’ve reported in the past, what they want to report in the future, and how do we fill that gap. Is very important milestone to accomplish on your ESG program development.

Sounds good, as we come to the close of the podcast, are there things that you want to share what you’re seeing as the future of ESG and sustainability? What are the trends? And what are the happy moments that are happening and maybe some big impacts that you’ve done or you’ve seen?

Oh, wow. We’re recording this podcast, you know, after the election. So there’s a lot of uncertainty within the ESG space, especially in the US about what the new administration will do to the SEC climate disclosure rules, so that’s one trend that I’m seeing but I think that is also being offset by the fact that it won’t impact EU.

It won’t impact rules that are coming out of Asia and the emerging markets there and also within the United States, there’s a lot of states that have taken steps in terms of at least climate disclosure. So I don’t think those trends are going to be reversed, even though at a federal level, there might be some reversal in terms of climate disclosure rules. So that’s the good and the bad part in terms of what I’m seeing trend wise, I think formalization of reporting, in the next few years on the backs of the CSRD out of EU and California is going to continue and propel the market.

That will also give a lot of confidence to internal sustainability folks to be able to make those advocacy and education to different buyers or stakeholders or internal, leaders that they need to convince because that gives them something concrete to take to them and do that advocacy work.

I think, you know, like we talked about side like there is a generation of workers, a generation of customers, a generation of clients, fellow peers for whom this idea about planetary boundaries, climate change, social impact, ethical workplaces is absolutely central to, how they want to be spending their money, how they how they want to be working with other companies.

And like this generation of people isn’t going anywhere and is becoming as climbing that corporate ladder to more decision making positions. And I think that is a long term. net positive that I see,

I think that was perfect way to end it. You’ve just reiterated the trend. I was speaking to somebody else as well and they were seeing a sustainability team and was put into the big it was a large corporation Because it was driven ground up.

So it was the employees. It was the people as you said in the supply chain Who kind of pushed the change, for them to kind of, have this, group of people being established, formalize it, and now taking it forward, even whether it’s research, product development, services that they deliver.

So perfectly said, Slok. I think it was very well said, and I’m very proud that this generation is kind of investing in the right things and you put it perfectly right. So thank you so much for your time. I appreciate your time. It’s been awesome talking to you. Great insight. Great learning. I’m sure our audiences will love it.

Thanks so much. Thank you for the opportunity. I appreciate it. Great chatting.