Creating the Value Proposition for Sustainability

Hello, everyone, and welcome to real talk of podcasts brought to you by River Logic. I'm your host Michelle Dawn Moody, and today we're talking to Aaron Burke, who is vice president of strategy for River Logic. Aaron, thank you so much for joining me today. Thank you for having me. Great to have you here. If we can, can you give us a brief bio before we get started? Sure. I am vice president of strategy for river logic, I'm one of the people who helped, former of a logic many years ago and have had the privilege of working in, the area of decision support and digital planning plans and mathematical optimization for the last twenty years. Wonderful. And today, we are talking about creating the value opposition for sustainability, and you have quite a bit of knowledge in that area. So I'm excited to kind of dive in here. So Let's start off with this, Aaron. Kind of a general question. Why is sustainability so important in today's business landscape? Well, for sure companies are aware of it and, and are feeling a lot of pressure to be become green, and the market is is demanding it. But further than that, countries have regulations that are increasing and modifying regulations constantly, you know, whether it's carbon or or recycling in these sorts of things, as that becomes more and more prevalent throughout industry businesses need to start thinking about how they're going to actually operate differently. And so thinking about sustainability is not just a marketing effort by companies or something like that. It's it really is starting to become something that needs to be attended to in their internal planning processes, how they develop their strategies, and how they actually operate on a day to day basis. Yeah. So we know clearly it's important, but how can businesses align sustainability initiatives with their overall value chain strategy? Well, I think that, value chain is one of the areas where sustainability decisions and things that you do to improve your sustainability, have a direct impact on things like your, cost to deliver products to your customers or your ability to manufacture so if you're not planning and if you're not thinking about your value chain in terms of what your goals are for sustainability, you're gonna miss out. And you may end up with surprises. For example, a company may have a sustainability initiative that puts constraints on how they can produce their product or how they can source their raw materials that has an unexpected impact on their profitability. And so under standing how these things, relate and how to navigate them is gonna become extremely important going forward. I love the term of use surprises. There may be some surprises. So let's talk about that. What are some challenges that organizations might face when integrating sustainability into their value proposition. And then more importantly, how do they overcome them? Yeah. I mean, surprises really is is the right word because I think for people who are leading sustainability initiatives in large companies, they're worried about being surprised. They're worried about I can do this initiative, and here's the cost associated with it, but how will it impact my day to day business? How will it impact, my customers? How will it impact my supply chain, my production? My raw material sourcing. So so the real goal is to get a handle on it. And there are a number of ways you can do that. The sort of the first step to that is to understanding the accounting. How do you add up, your, let's say, your carbon emissions so that you can understand how much carbon am I emitting? What do I need to do about it? So a a lot of the initial value chain, sustainability, initiatives revolve around simply accounting for or counting their carbon. Once you become good at that, once once you know where your carbon is and what drives your carbon, what activities within your value chain or are are responsible for it. Then you can start to ask questions, even to the point of needing, Riverlogic, for example, our digital planning to it is a value chain tool that looks at from end to end within a business all of the interactions within a normal business function. So my production is connected to my shipping. My shipping is connected to my distribution. My raw materials are connected to my sourcing and sourcing into my production, adding into that, layering into that value chain, the drivers for sustainability. Is that next step to understand when I do this, here's the impact on carbon. Or when I do this, here's the impact on recycling or whatever the metrics are that you're looking at. And carbon, carbon equivalent is really the one that people are focusing on today. But very soon, the bit the focus will shift to things like water and other chemicals and sustainability. So when it comes to enhancing sustainability efforts within the value chain. Can you tell us a little bit more about the role that technology plays there? Yeah. Technology and specifically Riverlogic with its digital planning twin, is able to tie together all of the cause and effect of of site carbon impact with your operations. And what that means is that as you're going through the process of managing your sustainability initiatives. You are always going to be faced with trade offs. So for example, the company can buy carbon credits, or they could invest in a new technology that reduces their carbon. And these kinds of trade offs have impacts up and down the supply chain. So for the decision makers, deciding when do I do initiative a versus initiative b, the regulations are changing all the time. So as the regulations get more strict, should I start planning now, or should I go a little bit farther? Should it be as I said, investing in technology to reduce my carbon. Should it be doing carbon swaps? Should it be connecting more of their supply chain up the supply chain and buying their suppliers and managing them are all different options. That need to be thought about and all the trade offs within their organization that can happen when they initiate those options having a a digital planning twin, a tool, I mean, in your, value chain, to help you make those decisions optimally is gonna be super powerful. Companies will have confidence that they're not going to throw the baby out with the bathwater so to speak as they're chasing sustainability issues maintaining their profitability, preserving, their margins, keeping their market shares where they want them to be growing, you know, growing as they want to grow. And to that point of super powerful, let's talk about wins for a moment. How can a strong sustainability proposition positively impact a company's brand reputation and also customer loyalty? Well, we we've seen that, initiatives do have an impact in most of the initiatives that our customers have our most visible on that marketing side where they're communicating directly with their customers about their sustainability. As they are able to achieve sustainability goals within their value chain, those can then be communicated to the markets. Some of the kinds of goals that that they might look at in the market are things like markets that have high recycling tendencies, you know, should I should I try to sell more into a market that is more likely to recycle my product? Or can I have initiatives that will encourage that market to, more frequently recycle? But that's you know, that's on one end of the value chain. The other end of the value chain is where do I get my raw materials? Are they source sustainability and and is my manufacturing sustainability, sustainable. All the way through my my supply chain and logistics are my truck sustainable. There'll be a lot of initiatives coming where people, you know, will be using electric trucks and other other means of reducing carbon within there. Logistics supply chain in addition to manufacturing and sourcing. A lot of factors coming into play, of course, but can you give us any real world examples where organizations have successfully integrated sustainability into their value proposition. And then on the flip side, reaped some significant benefits. Sure. Some industries today are actively, being under under regulations that change how they run their business with regard to carbon, certain kinds of construction materials, for example, And one of our clients has a limit to how much carbon they can, they can release per year. They need to stay within that limit. If they if they go above it, they they pay penalties and fines. So for them, the ability to see where that's being generated, balance their carbon footprint across their network, maybe They have some, ability to move their carbon credits from one part of the company to the other allows them to stay within and meet those goals without paying penalties, and still achieve their commercial requirements. So their customers are happy because they know these guys are are are are being, quite careful with our carbon. And at the same time, the company has has operated efficiently and has to main maintain their competitiveness. So we've all heard of the adage proof as of the pudding, but really proof is in the numbers. So let's talk about ROI. How can organizations measure the ROI of their sustainability initiatives and then Look at that from a short term versus a long term perspective. Yeah. It's a it's a little difficult right now. It's early days, I think, in in people managing, mathematically to their to their, Carmen strengths and and making those trade offs in a way that they can count the ROI. But it is clear that as things evolve and as regulations become, more standardized across industries as financial requirements. For example, the financial industry is getting into the business of of giving loans and investment money to companies with cut with, attachments to it that they have to stay sustainable. They have sustainability metrics to me. All of those things will have measurable financial benefits, bottom line financial benefits in terms of company profit and and company growth. So those ROIs are becoming more and more real. I think today, quite a bit of the ROI is is, you know, it's a round marketing perception and that sort of thing. So it's a bit harder to measure. But it will absolutely become more concrete as things evolve in the marketplace. As we're wrapping up here, Aaron, any final thoughts maybe a look to the future with trends in sustainable value proposition strategies? Yeah. I think specifically, and I'll go into a little bit more detail about managing sustainability initiatives within the value chain. Sustainability, carbon, specifically, people have divided up the kinds of carbon, impacts into what they call scope one, scope two, and scope three. So I'll define those a little bit so that so that they make some sense. Scope one is the direct carbon emissions that you are responsible for as a company. So these are things like the smoke stacks in in your in your factories or the exhaust pipes on your trucks that, that drive around. Scope two carbon that is created due to something that you buy or some some activity that you do. So an example, the most common example is buying electricity. You buying your electricity from a coal fired power plant or you're buying it from a hydro plant? And in that case, the carbon is being admitted by the folks you're buying from. And then you need to, you need to manage and be responsible for that. So you become responsible for your suppliers. And then scope three is really that, when we talk about things like recycling and product life cycle that happens to that product out in the world, although, you know, and that sort of thing. So what will happen or what is happening, what we're seeing happening is that companies that starting to manage their scope one, their scope one carbon emissions, are very quickly being asked to start managing decisions around scope too? How do they get their their energy? How do they get their products, etcetera? Those in in those cases, they'll have lots of different options. And in order to meet the constraints that they're given, so the government says you, there's so much carbon that you that you're allowed to admit. In the most economical way, it becomes a complicated puzzle of say, well, should I buy a car, you know, should I buy this energy here or there or in this other place? So very powerful analytical tools are required to help navigate that. You don't wanna invest too early because that could cause a reduction in your margins. You wanna invest just in time, or you wanna have those you wanna meet those goals as you are required to, going forward. The same thing it will be occurring in that scope three where you're now responsible for what happens to your product out the marketplace while it's, you know, while it's being used. It's life cycle. How will it be recycled? How does it consume energy as it's running? And that sort of thing. So what will happen is not just looking at and measuring carbon and and but also making very specific decision, very specific investments and timing in the in the appropriate way, according to your goals. So the tools that are available are designed Riverlot digital planning plan is designed to not be able to help you to be able to help you sort through those decisions. But also to be able to guide you and and sort of draw you a path, what is your plan over time to achieve those goals in the economic way and the most profitable way going forward. Talking about creating the value proposition for sustainability, Erinberg, vice president, strategy for river logic. Erin, thank you for your time. Of course, if if people have more questions, they can obviously visit river logic dot com. But you answered a lot of great questions today and put a lot of wonderful information out there. So really appreciate you being here today. Great. Thanks, Michelle. And I wanna thank all of you for tuning into Real Talks. It is a podcast brought to you by RiverLogic. Once again, you can visit the website riverlogic dot com for more information there and be sure to subscribe to the real talks podcast for more engaging conversations like the one you heard today. I'm your host Michelle Vaughn Moody. Thanks again for joining us We hope to see you on another podcast sometime soon.