Jennie Brooks, host of the Unstoppable Together podcast chats with Elizabeth Wayt, Booz Allen’s director of Environmental, Social, and Governance (ESG). In this episode, Elizabeth explains what ESG is and how it’s intertwined with DEI work, why she thinks the recent criticism of ESG is unfounded, and how she sees ESG shaping future business best practices.
Jennie Brooks:
Welcome to Booz Allen Hamilton's Unstoppable Together podcast, a series of stories that unite us and empower each of us to change the world. I'm Jennie Brooks with Booz Allen Hamilton, and I'm passionate about diversity, equity, and inclusion. Please join me in conversation with the diverse group of thought leaders to explore what makes them and all of us unstoppable.
Hello, everyone, and welcome to the Unstoppable Together Podcast. I'm your host, Jennie Brooks, and today I'm very excited to be joined by my colleague and friend, Elizabeth Wayt. Elizabeth leads the Booz Allen team driving the company's environment, social and governance strategy, often simply referred to as ESG. Elizabeth, welcome to the podcast.
Elizabeth Wayt:
Thanks, Jennie. I'm happy to be here.
Jennie Brooks:
It's great to see you, Elizabeth. Throughout various podcasts here at Unstoppable Together, we've briefly touched on ESG in a myriad of ways. We usually end up talking about ESG through the lens of its intersection with our DE&I work, but help us baseline our understanding. What is ESG and how are companies incorporating ESG strategies into their operations?
Elizabeth Wayt:
Yeah, I get that question a lot because ESG is a rather new term. It can be rather confusing. I think if you step back a little bit and you think of it as the global perspective, at a very high level, ESG refers to kind of three central groups of factors commonly used to measure long-term financial stability and societal impact of an organization. So, the term ESG itself originated in the investor community. They needed a way to measure and evaluate the ways that a company has an impact on some part of the environment or society, even as small as maybe the employee base. They wanted to understand better the impact that a company's operations had on societal environmental matters, and they really wanted to understand the governance systems that a company has in place. It helps them to manage those impacts.
It's an evolution, I think, from the prior terms of CSR or sustainability that you still hear around a lot. ESG kind of takes it up a level. It puts some structure and some framework around this. At Booz Allen, we've been doing elements of ESG for decades as you mentioned. Our D, E and I history is long and proud, but what this helps us to do is to bring these issues together under essential framework in a standard way that we can communicate with our investors, our clients, our current or perspective employees about the comparable kind of decision, useful data that we have that's tailored to us, specific to how we operate, but allows them to have a better understanding for what we're trying to do. I was recently at an event, and I heard somebody put this in a great framework for me, and it's basically saying that ESG is the framework.
The structure that we're working in DE&I is a mission. Our ethical operations and our ethical conduct is a mission. Cybersecurity is a mission. So, we have a lot of missions in the ESG space, but ESG itself gives us a structure and a standard way to talk about, to measure and to report on what we're doing so that we can be compared over time against ourselves and we can be compared with others in industry if they're trying to kind of see who's doing better or who's doing, who's moving out further. We try to level up the playing field a little bit with ESG.
Jennie Brooks:
Okay. And can you give us some additional specific mission areas under the broader ESG umbrella, and how do companies typically decide what they'll focus on, where their priorities will be?
Elizabeth Wayt:
Yeah, so it is huge, and I think if you were to step back and look at the global reporting initiative, there's hundreds of different things and we kind of step it back and say, "Okay, what makes sense for our business?" And so, we go through a process of talking to stakeholders and investigating and things like that to try to understand what we think is important to validate what others think and is important. And then you go through this materiality process, and you come up with your material topics. For Booz Allen, it's things like, and I don't think that they should be surprising to anybody because if they're natural and real for an organization, they should feel comfortable. It's ethics. Do you have ethical behavior? Are you behaving in an ethical manner? Do you have strong governance? Is your board engaged? Do they provide meaningful oversight about these topics and issues?
It's obviously DE&I, it's cybersecurity, its talent acquisition, its talent development, it's your people programs. And what we do then is once we've defined what our universe is, we look at all the frameworks out there, how are people talking about these topics and issues? And we start by saying, "Okay, what of those make sense for us?" What is the most meaningful way to talk about our business that will make sense, that's comparable metrics, but that resonates with who we are as a company. We don't want to come back and say, "Oh, we read this study and it says that we should be reporting on this X metric." And then we go to our business leaders, and they say, "That doesn't make sense. That's not how we operate." So, it's got to be a marriage between a clear communication on these topics and areas and what we do and how we operate because then you're really giving some insight into the maturity of our thinking as an organization and how we manage topics and issues, and then that lets people make decisions about us and understand us a little bit better.
And that's kind of the process that you go through, and you refresh it on a regular basis. We actually went through a really rigorous one a few years ago last year we did a survey of our employees to get a mindset refresh, and we use an outside company that uses AI, that helps us to continuously monitor these issues, those risks over time and whether they're becoming more or less important to our stakeholders. And then we'll probably in 2024 do another full refresh of our materiality assessment and make sure that we're still on the right track. And that's why I think that ESG is actually a really strong tool for communicating because you don't do it once and then forget about it. It is a living constant assessment to make sure that you are measuring and your impact in the right ways, on the right topics, and you add things, and you take them off based on business needs and business changes, but it really kind of keeps you focused.
Jennie Brooks:
That's great. And I understand it's clear from the employee perspective that we would find some of those things important to us right now experience with our employer, but the research indicates that companies who are making this commitment are also performing better. Is that accurate?
Elizabeth Wayt:
I think it is. I think we have somebody on our team that kind of looks at this over time. They're actually looking at our financial performance and our performance in the markets as it compares to our ESG disclosures and changes that we put in place. I think that that's true because I think fundamentally good ESG practices and thinking about the broader impact of your organization is a sign of your maturity of your management system. And if you have a strong management system and if you have insightful engaged leaders that are looking at the broad way to manage issues in your organization, then they're probably doing a much better job of driving your financial performance because they're seeing all the parts that actually influence financial performance and not just looking at one or two primary factors. They're really looking at what are the risks to us.
So, if you think about what are the kind of risk issues that we might have in an ESG perspective, maybe a leader that's not really engaged with ESG would just be looking at their current performance saying things look really good. Our clients are happy, we're going to keep going. No changes necessary. I think if you're engaged in these broader ESG discussions and you're thinking more broadly, then you're thinking along the horizon, you're anticipating changes that might be coming that will affect your business. Whether you're thinking about the climate requirements that we're looking at possibly coming out from the SEC and the FAR, we've been anticipating those changes for multiple years now, right? We've been working because we know that it's coming. We've been putting programs and systems in place to anticipate requirements that are probably coming pretty soon. And I think that's true across ESG. It's a little bit reading the tea leaves, but in a very analytical scientific kind of way and saying like, "We're reading the tea leaves that are really germane and important to our operations."
Jennie Brooks:
And what do you say about the naysayers who might say, "Ah, no, I don't think this is of real impact."
Elizabeth Wayt:
Yeah, I obviously disagree with them. I respect their opinion. Everybody's bringing their own perspective to life. I don't think that they are taking the full ESG perspective and approach, or don't think that they're taking the time to really understand that a well-managed ESG program isn't just a fly by night emotional reaction to an issue. It is a rigorous process that we go through to make sure that we are focusing on the issues where we have the greatest impact or that have the greatest impact on us as an organization. And we're putting metrics, goals, rigor in place to drive against those. And I don't think that that is really anything worse or bad or different than just being a good business manager and a good steward of your investor's money.
I think that if I'm investing in a company personally, I want to make sure that the management is really thinking about the value of my contribution and making sure that I get the return on that investment. And that means you're looking at a lot of issues because a lot of issues, in fact, the value of that money. And so, I think it's a knee-jerk emotional reaction. But I think if somebody steps back and objectively looks at it and looks at the issues and how ESG actually operates, then they would probably agree that it's going to add a lot of value and increase their bottom line in the long run.
Jennie Brooks:
My impression is that the ESG activity has been something we've been seeing sort of emerge in recent years. So is it that the work was already done but not measured well or that it's increasingly an imperative because of...
Elizabeth Wayt:
It's both, I think.
Jennie Brooks:
Okay.
Elizabeth Wayt:
A lot of the work had been done. There's been a lot of really great work that's been done around obviously DE&I and I and community impact, but not easily measured and not universally comparable. A lot of those programs tend to be very company specific because then they should be. But if somebody from the outside is trying to compare and contrast, it's really hard because how you talk about it is sometimes and has been very qualitative. And so, trying to put some structure around that is one part of it. And then there's the other side of it where we are seeing a lot of more rigor and interest from regulators in the US. So, the SEC has said that ESG has been on their agenda for a couple of years. We've seen action with cyber. We've seen action with the climate disclosures. We're expecting more proposed rules soon around human capital disclosures. So that's driving a lot. And then international, there's a lot of pressure internationally around standardized reporting and disclosures, if you will.
Jennie Brooks:
And so, anyone with an interest can go online to a company's website and finds their... Yep. Okay.
Elizabeth Wayt:
Hopefully. Yeah. Ours is available is boozallen.com/esg. We make our annual ESG report is available for anyone there. We also have a kind of reporting hub, which has our historical documentation and historical reporting. Hopefully a well-run company is going to be open in their disclosures and telling you about what they're doing. It's becoming easier and easier to find it for companies. And maybe five years ago you would've been really doing some digging to try to figure out what somebody was doing. We report against certain standard international frameworks in an effort to make it easier for people to find our information and standardize how we're doing it. But I think you're seeing a lot of a trend in that direction with transparency and disclosure.
Jennie Brooks:
Okay. So, tell me a little bit about your thoughts on how ESG provides a more equitable future.
Elizabeth Wayt:
So ESG can be the framework to help drive that equitable change. We are focusing a lot of our action around our social impact pillars and the central theme of that being, creating a more secure, resilient, and equitable future world. Within that, we have three pillars that we've established, empowering diverse talent, making innovation accessible to all, and driving community resilience. What we're working towards now in developing our strategy is taking those material topics and issues and aligning them towards pillars, and then working with our business partners to promote or work with them to design change that will align towards those areas. So, if you think about an equitable future for all, we have a strong partnership with our DE&I team and our community impact and philanthropy team, and we're working at how can we design programs that go through that, the entire pipeline between If we want to have a change, say in the DE&I space, and we want more equitable opportunities. Well, can we work with our community impact team and go back to how we're engaging in the community to create that pipeline and create that interest early on?
And so ESG helps to bring them together and give them a framework for designing it, but then also communicating about it later and also kind of pulling them together in a central flag to say, this is the thing that we're all driving towards. And it just makes it, I think, easier for the business leaders to combine forces towards one central thing rather than having independent and separate missions. So ESG can be that central motivating engine, if you will, to drive towards that equitable future.
Jennie Brooks:
Okay. So, what's next? What's in store for 2023?
Elizabeth Wayt:
So much is in store. We are really focused as a team, and I think as a company at looking at making sure we have investor ready data, we're looking at our data, can we defend it? There's a lot of what people say, squishy stuff. So, we're trying to put some solid around what is historically been squishy. So, we want that investor ready data. We are really looking at having strong data systems in place to match that data and to support that data and really holding ourselves accountable. So how can we use our innovative mindset as a company to drive how we're trying to communicate, right? We're going to take that data, make it available to our investors, but then also we want to make it so that it's available and useful to our business leaders. We think that have a support around the company for ESG, but there's maybe not a really close tie in understanding between how ESG can help our business.
And what we're really focusing on is can we articulate a clear strategy and give information and empower our business leaders with the same kind of insights that we get about what the world is saying about us with ESG in a way that ties to what their goals are and what they're trying to achieve. So, I guess in that way, we're trying to really go deep and embed ESG thinking as part of our everyday business process. So, it's not an add-on, it's just kind of like who we are. It's part of our DNA to think about all these varietal issues and consequences.
Jennie Brooks:
Awesome. Elizabeth, at the end of every podcast, we give our guests some free space to share their final thoughts. What would you like to leave our audience with today?
Elizabeth Wayt:
Well, I think that what I'd like everybody just to walk away with about ESG is it is not as complex or as overwhelming as a lot of people might think it is. Fundamentally, ESG is about creating a framework to communicate more clearly to stakeholders about what's important to our company, how we operate, and really what matters. And if I can get people just to understand that, I would be delighted because we are not trying to change the world. We're trying to kind of pull everything together and drive that impact.
Jennie Brooks:
Thanks, Elizabeth.
Elizabeth Wayt:
Thanks, Jennie.
Jennie Brooks:
Thanks for listening. Visit careers.boozallen.com to learn how you can be unstoppable with Booz Allen. Be the future. Work with us. The world can't wait.