On this week’s guest episode I chat with Tensie Whelan, a Clinical Professor of Business and Society and the Director of NYU Stern Center for Sustainable Business.

Many people think that sustainability and profits don’t align, but Tensie takes us through how they can by connecting the financial sustainability of a business to the social and environmental sustainability of a business's core focus. She believes companies should make money by doing better.

She also runs through the flaws of the broader ESG framework, suggesting ways to improve it.

Before she built the Center for Sustainable Business at NYU Stern, Tensie ran the Rainforest Alliance - a multinational non-profit designed to help conserve rainforests. We dive into that issue and touch on ways to tackle it as well.

These are some fascinating and important topics that I think every entrepreneur should think about. I hope you enjoy it.

Show Links:

• Follow us on Twitter: @TensieWhelan, @NYUSternCSB, @mpd
• Guest Links: NYU Stern Center for Sustainable Business, Rainforest Alliance
• Articles by Tensie: ESG Reports Aren't a Replacement for Real Sustainability, How to Talk to Your CFO About Sustainability‍
• Sustainable Market Share Index from NYU Stern Center for Sustainable Business 
• Podcast Links: YouTube, Twitter, LinkedIn

Transcript (this is an automated transcript):

MPD: Tensie, thanks for being here. All right, let's jump in. I think it's important in this particular conversation to start a little bit with your background. Would you mind giving us just a quick overview of what you're doing now, and then we'll rewind a little bit to how you got here?

Tensie Whelan: Oh, sure. No, I'll be glad to. So again, so much fun to be talking to you today and but my background, I'm currently running the Center for Sustainable Business at NYU Stern School of Business. I launched the Center about six and a half years ago, and the Center's focus is on helping current and future business leaders to really embed sustainability core to their business strategy, to drive better societal impact, but also better financial performance and competitive advantage.

And so we do that through working with our students. So we have programs, undergrads, graduates, executives. I do a lot of executive training, and then we also do a lot of research and thought leadership. But on the research side, we're looking at things like, how do you actually understand and monetize the business case for sustainability?

What can we learn about consumer purchasing of sustainability marketed products? We've done some really unique research there. We've also done research into private equity and the good, bad and ugly around how private equity can drive better societal performance and financial performance or not, right?

So a whole series of really interesting research initiatives that basically aim to help business, help society, but also help themselves and improve their perform. 

MPD: I love the way you marry these two things together. Cause I think it's contrary to the common perception. Usually when we hear social impact or ESG or any of these other catchphrases, they're delivered in the assumption or context for the recipient of cost.

And you sing a tune about how it is financially desirable, which I love. . So we're gonna dive all into that. You have a non-traditional career trajectory you did a lot of social entrepreneurialism along the way. Can you share a little of your journey and how you got here and what you learned from it?

Tensie Whelan: Yeah it's been fun, Mark. I've been really lucky in the things I've been able to do. Let's see. Prior to coming to Stern, I ran Rainforest Alliance. 15 years. Rainforest Alliance is an organization that uses market-based solutions to drive both sustainable livelihoods and biodiversity conservation.

And the organization works in 60 countries around the world with. 5 million small producers, 5,000 companies to transform production of tea, coffee, forest products and things like that to make it more sustainable, both from a livelihood's perspective, an biodiversity perspective. And I came to that job having worked in Latin America as a journalist on environment and development issues, and came back to the States and took the rainforest lines job when it was just a $4 million organization that nobody really.

And then I built it into a $50 million organization working in 60 countries around the world with, as I mentioned, thousands of companies. And also with about let's say 20% of the world's tea, 14% of the world's cocoa. So really, Mainstreaming sustainability. And in that work I learned a lot about how do you, how companies can drive better performance.

How everybody in the value chain can drive better performance through more sustainable practices. And we can talk a bit about that, but that's fascinating. I got to go. Everywhere around the world, the Amazon obviously, and working on sustainable forest management or sustainable tourism, but, to West Africa, looking at Coco and Kenya, looking at tea and, just very fascinating set of experiences.

And then prior to that, I built, worked on a couple of different organizations, building them out. I built the Brooklyn Bridge Park Conservancy, so for those who live in New York we're gonna have a horrible, nasty development down in between the Manhattan and Brooklyn, bridges along the waterfront.

And so I was able to organize people to stop that and put in place a whole plan around building out a park which we have now along Brooklyn Bridge Park, which is just wonderful. And prior to that, I ran the New York, I built actually organization, New York League of Conservation Voters to help. Get politicians, Republicans or Democrats, but those that are pro-environment elected we had Larry Rockefeller and Bobby Kennedy on the board, for example back then, and then, bipartisan and then we I also built a federation of state leagues of conservation voters all around the country.

So it's been, doing a lot of work like that, really building organizations that are gonna have a positive impact on. On our current status, but also in our future, and finding that win-win. That's what I like is finding the way to bring stakeholders together to create better opportunities for everyone.

MPD: Yeah. That is the novel twist, I think, and everything I keep hearing from you is really finding an alignment. Just before we jump into that, you talked about the raid Forest Alliance. That sounds like a huge job. , what was the motivation for you to jump from that to heading over to Stern to run the program you run now?

Yeah, 

Tensie Whelan: So for Rain Forest Alliance, it was a huge job and as I said, working in 60 countries, I was traveling 60% of the time running this big organization. I also believe that, You need turnover running organizations that have been 15 years. So I thought maybe it was time and I was looking around for what I wanted to do next, and I was looking at do I want a chief sustainability officer job?

Do I wanna work for a foundation? Do I wanna go to another ngo? And I actually had gone to NYU undergrad and I had Taught as a guest lecturer at Stern when I was running Rainforest Alliance and right when I just serendipitously when I was thinking about what I wanted to do next, the head of that program at Stern asked me if I'd like to come teach.

And so I thought about it. I came back to him and I said, Actually, a lot of what I do is teaching. You're persuading people to engage, but I'm an entrepreneur and I can't just teach. How about I build a center for sustainable business for you? We'll put in place cuz they had nothing we'll put in place these programs, the research, I said I'll go raise some money.

And I showed them what their competitors were doing and that nine out of the top 10 business schools had sustainability programs and Stern did not. And then I got a million dollars from Citibank to get it started. And so they said yes, great. Made 

MPD: it easy. Exactly. . Yeah, that's. So what is sustainable business just to baseline this?

How would you define that? 

Tensie Whelan: Yeah, so sustainable business is business that looks to harmonize positive environmental impacts, positive societal impacts and profitability, right? You can't be. A sustainable company if you're not profitable. But also I believe you cannot also be a sustainable company if you don't take care of your people.

Take care of the people that are affected by your products, take care of the environment. And in fact, it makes good business sense to do I would also say that, if we get more into the details of what it means to be a sustainable company, it's one that doesn't see this as a corporate social responsibility exercise off to the side where you give a little money to charity, but it's actually.

Embedded in your core business strategy, right? Your business strategy incorporates what are the material most important environmental social issues in your sector and in your industry. It incorporates engagement with key stakeholders from non-profit organizations to suppliers to employees around what they think are important environmental and social issues for your company.

And. It means that you've set inside of your company key performance indicators that will help you drive, let's say more energy efficiency or more diversity and equity in your company, right? Those types of things. What are 

the 

MPD: misconceptions about this? Because this is, this has become a pretty, there's a lot of strong opinions.

It's been politicized and everything else. What can we take out of the conversation before we get started? 

Tensie Whelan: Yeah. I think it's unfortunate it's been politicized because basically if you look at For example, the state of Texas who is opposed sort of ESG investments, right? And you look at what if you, when you go into the state of Texas, there's a huge sign everywhere on every street that says, Don't mess with Texas.

And it has an enormous fee for throwing your litter out the window, right? When you go to Texas, there are. Health regulations in terms of working conditions, there are environmental regulations in terms of ensuring that there is a negative impact of oil and gas extraction on people living near the site.

So this is stuff that is just done anyway, right? And so when you're looking at sustainability. It's about ensuring that you don't have negative impacts on people, which anybody should think you would want to do, right? That's what regulation does. Only this is a way to do it through market-based forces, which in theory, conservatives should like

And secondly it enables companies to not only manage for risks environmental and social risks, but also look for the upsides, look for the business opportunities. So I'll go back to. Huge generator of wind renewables. Huge opportunity right there. I can't imagine that the government of Texas would say to businesses, you can't be building renewable energy facilities, right?

Because it's good business. So what we wanna see around sustainable business is the recognition that it basically is good manage. What we're seeing is that sustainability is driving innovation. It's driving operational efficiency. It's driving employee engagement and retention. It's driving supplier resiliency, it's driving sales and marketing, all elements of good management.

And I can, let's see. Give you an example. Automotive companies. We did research with a variety of companies. Looking at the business case, looking at how they had Driven better financial performance. And for example, through their waste management strategies, they were doing things like recycling, paint, and solvent.

And when you recycle paint and solvent, you no longer buy the virgin stuff. You no longer pay the waste disposal costs. And actually they had some leftover recycled product that they were selling. So they were saving money and they were had a small revenue Another example is a pulp and paper company in the southeast of the United States.

Water is free in the United States. So when they were looking at, should they reduce their water the company mill managers said, No, Why should We don't pay for it. So then they, the sustainability folks did a study. And what they found is all that free water, which where they were using an enormous amount of it because it was free

They used an enormous amount of energy to move it around to heat and cool it. And then they had enormous waste water to dispose of. So all of that free water was costing them 1.5 million per mill per year. But they never thought about it as what effect is, which is an operational inefficiency.

And. In both of the examples company's performance is improved by actually looking more closely at these issues that we tend to just think of as compliance, but actually create opportunities. And I can talk about a variety of other areas too, rather than examples. I wanna talk 

MPD: about one here's a question for you.

When we think of sustainability and the nemesis of that, we think big. How can a company like Exxon be thinking about sustainability as an opportunity? , right? You're, you really taking a different lens, the way you present the alignment of this? I'm trying to understand, are there limitations where hey, in these particular scenarios hey the water actually has a cost associated with it.

Stop wasting and it becomes a good case. Or are there, And the question is, and are there also scenarios where there is no incentive or market force to drive a sustainable behavior and we just need government regulation to deal with negative external. I think 

Tensie Whelan: we always need some government reg regulation.

Absolutely. If you look at when you have companies that are making steps forward on sustainability, undertaking these types of innovations, they still need, for example, on the positive side, incentives for all the research and investment, like what we saw early on with solar. Don't necessarily need that now, but we did early on.

So the incentive side is important. On the other side of things, on the sort of regulatory enforce. We need that as well, because otherwise you have bottom feeders who really undercut those companies that are doing a good job and make, offer. If we look at During the Charles Taylor's war in Liberia where he was killing people to keep in power.

He funded that war in his guns through cutting down all the forests in Liberia. That wood was then sold into the international market with nobody really paying any attention to where it came from, even though it was illegal, obviously, because it was cheap, right? And there was no enforcement of it.

So that meant that com, that. Companies that we're sourcing sustainably and responsibly were undercut, right? So you want enforcement of those kinds of things. But that said, I actually do believe that market forces can drive a lot of positive behaviors. So let me go to your oil and gas question. Right?

So what do you do 

MPD: if you run a company that is supposedly the antithesis of sustainability, right? So how can you be sustainable 

Tensie Whelan: within that? Yeah, so I do think that oil and gas companies need to begin from the understanding that their businesses are gonna sunset in the same way that, Kodak sunset it.

We have throughout history. Different technologies that sunset and this oil and gas is going to sunset. It's gonna take a while to get there. And we can't go from zero to a hundred overnight, and we need these companies to figure out their role in that transition. So how do we go about it?

One which they were just forced to do, bringing in people on their board and their leadership who actually have experience in carbon transition, in renewables, in new technologies who can help. Think through what those options are. So that strategic engagement, which has had been lacking and I think is still lacking at Exxon, but it's gonna be an important piece.

Secondly, looking at their existing capabilities and how they can be brought to a new sectors, right? Cuz they have a lot of expertise that you could use. For example, carbon capture technology, right? So how can they take what they already have and think about? Repurposing it to solve for some of these challenges.

Like how, what do we do with all these emissions and carbon capture is a really interesting place for companies to go. Another would be to, stop thinking of themselves as an oil gas company. Even not even many are calling themselves energy companies, but actually start thinking about themselves as a.

Low carbon future company and what is and if you think about that and you're thinking sort of 10 years, 15 years into the future, where do you wanna go and what should your mix be over that period of time and how do you begin to develop those other sources of all energy?

There's a shell has entered into. Joint venture with koan out of Brazil to create reen, R A Z E N, which means the roots, I think which is working with sugar cane, ethanol, solar, and a variety of other. Energies to create a one stop shop for customers around energy solutions that are low carbon.

And on the ethanol front, they developed sort of second generation ethanol that's more renewable and focused. So you need that kind of innovation. Again, that's a small bit for Shell right now, but it's an interesting place to explore. Yeah, so I think there's lots of opportunity. For companies like 

MPD: this is, I guess it's a little bit not the appropriate question for someone in the crosshairs of a massive technological revolution, right?

An energy company. But it is for the rest of us, a normal industries or other industries, and it's no normal. Is sustainable sustainability a nice to have or a must have? How should people be faking about. Conversation we're having as they're opening up their own curiosity for their own 

Tensie Whelan: industries.

Yeah. I think companies have seen it as a nice to have rather than a must have. But I think that I am, I've seen that change and it's changing for a number of reasons. The first is that A number of risks are becoming very material. If we look at climate risk and you are a business in property and casualty, or in food and agriculture or in many industries, and you're not understanding that climate risk, that impact of extreme weather.

You are probably gonna be really challenged financially. If you like do you, if you like coffee, like most of us second most traded commodity in the world after oil climate change is dramatically affecting the productivity of the beans, even to the extent of The altitude that they grow in the top.

Quality greens go in, are going higher and higher, and you only have so many tops of mountains where you can grow coffee, right? So if you're on coffee and you're not planning for that risk and figuring out how you're gonna manage it, you're gonna have real challenges. So there's that risk side that is becoming increasingly apparent to business.

I of course, like the opportunity side more because I like cuz of the entrepreneurial side of things. I wanna see like where I can go with it, right? So on the opportunity side, There's the employee engagement, retention piece, right? There's a war for talent right now. We see generation Z and millennials really care about this.

They are choosing companies that have a purpose, right? So if you wanna compete, that's another big element. And actually, if you are a bad actor, as we've seen, you're likely to see social media tweets and a bunch of stuff coming from your employees about how they're unhappy with you, right? So that's another area.

Another benefit for business, as I mentioned, the operational efficiency side. Companies think about waste as compliance, but actually it's the ultimate operational inefficiency and they need to shift their mind, their thinking about that. There's also the sort of innovation play, right? So we're seeing a lot of new products and services being developed with sustainability as a driver.

I'll give you an example and cuz it shifts how you think about things. It's like a design. This is a prototype, but I'll give you, I'll give you a bunch of real examples too, but I love this prototype type example. Goodyear engineers created a tire. Okay? This tire is 3D printed, so only printed on demand.

It is printed out of recycled rubber, right? So reuse, it's hard, so it lasts longer. Rather than being inflatable, it has moss embedded. Outside the hubcap that moss takes in carbon dioxide and emits oxygen. So it contributes to reduction of climate change. It also when the road is wet, when it's raining, the moss makes the tire stickier on the road, so it improves safety.

And then finally the hubcap has a little AI element that. Talks to an autonomous vehicle when you have one. Now it's a prototype. I don't know that I'll have anything that complex, but it's fascinating. This is like a freaking tire, right? And they're thinking about how to solve for all these different issues within the tire, right?

And there's so many things IKEA has Curtain that this is not, this is real. That that is an air purifier, right? Nike, their fly net technology has reduced waste by 80%, while at the same time it's a higher performing shoe because it's lighter. It's made out of one strand of recycle poly rather than stamping it out, creating all this waste, right?

And all of those come through like different design criteria, right? When you bring together sustainability. But like with Nike, just as an example I talked with Hannah Jones, this former cso, and she showed me the first prototype, like ugly, hideous, heavy, sustainable shoe they made cuz they only included the environment as a criteria.

But then when they started to look at it with design, like we wanna hire performing shoe and we wanna reduce waste, then they come up with this really innovative like product that is now a category disruptor. Everybody's using it. 

MPD: I love these examples because these are not. Examples of companies just trying to do good when management happens to care.

These are attempts to create products that will be more marketable cuz consumers care and that have more improved efficiency or better applications. Exactly. And so they're real, to your point, alignment of economic incentives and market forces to drive a better for a better earth. I love that. You know what I think about.

I think about how these applications we're talking about are generally r and d for large companies interplay our team, we're living at the frontier of innovation. The very beginning of idea inception, companies that we're funding are, 10, 20, 30 employees we're starting new companies. We're coaching companies that, are three to five employees typically in extreme cases, one or.

So we're living at the beginning stages. Do you see the sustainability thinking applying to certain stages, Is this more of a conversation for hedge funds looking at public markets or the LBO folks who are dealing with private companies that are more mature typically? Or does it also apply to early stage or anything in.

Tensie Whelan: I think it applies at all stages. It's just gonna differ, right? I think we're seeing more and more startups and more accelerators and more venture funds focused on companies that are developing solutions for some of these environmental and social challenges. I'll give you an example of one of my a stern alum.

Young he was family came of immigrants. They had hard, real challenges accessing credit because they had no credit history. So he's developed a company called a Susu that's done very well, but, like a startup that. Works with rental information and landlords to plug that information into credit bureaus so that if you pay your rent on time, which obviously your landlords want you to do so they have an incentive to participate, then you can build that credit history and it's going really well.

And he's got great investment in it, But it comes out of this kind of social purpose is where he's focused. And there's others another startup that. Got to know, called Water Plan has developed tools for companies to manage water risk in their supply chains. So there's just, I think there's all kinds of opportunities for smaller companies who are set up to, to solve for some of the challenges that the bigger companies aren't the, they're not the innovators they need to buy that stuff in.

MPD: Is there a stage where you typically see a stronger penetration or adoption of this 

Tensie Whelan: mindset? And so there's two mi, There's two types of mindsets, right? One is this embedding sustainability in my core business strategy. I would say I see that more at the big multinational level than I, and I think small and medium size companies are beginning to get there.

And obviously some had it, you have some family owned companies or some just companies with Patagonia, like Patagonia that have had that kind of ethos forever. But still, I would say the, you see it more typically in the large multinationals. But then you have more of your social entrepreneurs and those tend to be the smaller companies that in some cases are getting bought by the bigger companies.

But that I see across, small companies often, right? A lot of companies started by founders who really care about whatever particular environmental social issue they're trying to manage for. But that's a more of a pure play impact as opposed to an integrated kind of sustainability into a broader company.

MPD: Got it. Makes total. Okay, so you're out at nyu indoctrinating the next generation of leaders on this mindset, which is really powerful. What are other channels or mechanisms available that are working for getting leaders, management entrepreneurs, executives to adopt this way of thinking?

How do you, how does this go viral? How do we get, how do you get the word. 

Tensie Whelan: One thing that I'm doing is a lot of training for management consulting firms, so actually training thousands of their employees the big, amongst the Big Four and others, and. That for me is exciting cuz they're force multipliers.

They're going out and consulting with the companies on these topics and when we want them to do a job be, for me that's an investment and it goes much wider than that one particular person. So all the companies I interact with, so that's one area. Another Area that companies can access or are industry associations are increasingly incorporating sustainability and creating pre-competitive collaborations around tackling challenges that industry might have.

If you look at World Business Council for Sustainable Development, for example, that brings together businesses or the Ethical Tea Partnership or the World Cocoa Foundation, they're. Industry plus other stakeholders working together to solve for some of the bigger challenges and opportunities for those sectors.

So that's another way that companies can get help. I would say the board leadership really important to ha to recruit and engage board members who have both a commitment to and a background in esg. As well as improving that diversity of the board as that's been a conversation, an ongoing conversation.

I did some research looking at the Fortune 100 boards, 1,188 board members. Only three of them had climate credentials. Only eight of them had cybersecurity credentials. None had worker voice credentials. It was like amazing to me to look at that, in our biggest 100 companies. One of the challenges with boards is they tend to be people.

Who used to run companies before these issues were important, right? There tend to have a pretty narrow perspective of not a lot of experience and therefore don't bring that to the board strategy conversations. And I think that's a challenge. So I think putting in place a good board engagement around sustainability and strategy both in terms of their governance and committees and in terms of their credentials training or bringing on board members would be an important element.

Two aligning incentives, right? And so when I'm looking at companies and trying to decide how really embedded their sustainability strategy is, one thing I ask them is, Okay, so are you incentive to so you, Oh, great, you have these ESG targets, Are you incentive to meet them? Nope. . Okay, then well , or what about capital allocation?

Right is this is another thing. You've got these great commitments. What about how do you run your capital allocation process to ensure that you're actually investing in those commitments? This goes very much for oil and gas companies amongst others, right? And actually talking with some companies who have put in place unique.

Capital allocation and IRR analyses to be able to ensure that they invest like Microsoft has created that internal price on carbon right where they tax their units based on their emissions, and then they take that money and put it into energy efficiency improvements and offset purchasing, right?

So there's a lot of ways that you can drive behavior through these types of mechanisms. Did that get it at your. 

MPD: It did. It did. The interesting thing about this market is this is, when you're talking about it, it seems like such a no brainer, right? You can make more money, do better for the world, drive innovation in good ways, particularly in large corporations and, educate the next generation of leaders to think this way.

Okay? There's a backlash, right? There is a market ESG has taken. A different meaning to some folks, it's become targeted. What is happening? Why is there an adverse response to something that seems like a fairly benign, concept? 

Tensie Whelan: First I think there's a couple of genuine challenges around esg.

Critics are glomming onto, and those challenges are real. So I'll talk about those. And then there's some other issues that are not real, which I'll talk about as well. So on the right let's do the real ones. Do the real ones. So the real ones include ESG as a construct is versus sustainability.

So let me just start there. Environmental, social, and governance, right? That was started as basically a way to look at and measure environment, create metrics around environmental, social, and governance metrics. It doesn't even include profitability, right? Sustainability. Is actually environmental social governance is in there, though not listed as such.

And profitability. So ESG really is about how investors set up a measurement system. And as an acronym, it's not very helpful and as a measurement system it's not very helpful even although it can be. But, so here's the challenge with the measurement system. First of all, companies are reporting to ESG metrics that are all over the place.

So they vary, they're not audited, right? So there's apples and oranges. So you can't really tell a lot in terms of performance versus the different companies. Secondly, the standards that exist, The Sustainability Accounting Standards Board, which is now morphing into an international sustainable standards board that's been set up by the i R s that has the International Accounting Standards.

So that's a good thing, but that their metrics are all process based, not performance based. So an example of that would be in the apparel sector, chemical management is a material ESG issue. The reporting standard asks if you have a chemical management policy, yes or no. That doesn't tell you how well or bad that the company is performing on that topic.

And the reason why they can't get at performance is because as a reporting standard, it's so broad, it across so many different companies, so many different locations, so many different places in the value chain, they can't get that level of detail. But here's the thing, there is no difference in reporting between that company and a company that's actually developed a bio-based.

That has no toxicity, uses less water and energy and creates competitive advantage cuz you can sell it to a product. They end up the same in the reporting framework. So that shows you some of the challenges with the type of data being process-based. Another a problem is that the rating agencies that collect all this data and then generate it to sell to investment to asset managers.

They all have different methodologies that are, it's their own ip, that's black box, right? About how they weight all those data points and also what additional data points they bring. And so then you have wildly different ratings of the same company. So you probably saw Elon Musk have a hissy fit about his drop, being dropped from s and p.

But if you look at Tesla, actually, Five. I have a research paper. I didn't do it, but I read it where five different rating agencies each gave Tesla completely different ratings. And if you think about it, You could. So the social and governance side of Tesla, I think everybody would agree, has some real problems, right?

So maybe you're rating weighting those more than the environmental side, or maybe you're rating the environmental side, but you're looking not at the promise of these electric vehicles, but you're looking at the actual practice, which is you've got problems with the sourcing of the chemicals and the batter.

You can't recycle the batteries and most of the energy being currently used by those cars is from non-renewable sources cause of non-renewable electricity sources. So then you might say, Okay, the environmental contribution is not that much, but you don't know because all of these rating agencies, they don't tell you how they're coming up with these.

So there's a there So I think those and that, and then as I said, I think none of this is audited. So companies can just say whatever they want, say their problem, right? So there, there's a series of challenges here. The other big challenge I would say is that investors and others are asking companies to report on these ESG metrics that, as we mentioned, are process based companies are respond.

And reporting on these metrics without having in place a sustainability strategy and KPIs that then they report to. So they're just running around trying to find some data they can stick in to like report . 

MPD: When you say process based, you're making the point that ESG is saying, Hey, do things that are good as, and we'll measure them as much as we can and sustainability is.

Do things that are sustainable for the earth and the economic viability of the company and getting those aligned. The earth and the, And if they're not aligned, it just gets This is where this reputation comes of just being a cost center or distraction. Or even a marketing ploy. To attract investors. 

Tensie Whelan: Exactly. 

MPD: Yep. If you were in a position where you could make wave a magic wand and change things, what would you change to make this. How would you fix this? 

Tensie Whelan: I would.

Requiring all companies to assess what are the most material, environmental and social issues in their ecosystem. Listening to stakeholders as well as them, their own internal external stakeholders and internal stakeholders. Mapping those to their business to look both, not only risks, but also opportunities over a kind of five year period.

Cause I know companies have a hard time planning longer than that. Three to five. Where they're where they could manage for those risks and build those opportunities. Then put in place a set of robust key performance indicators to track how they're performing against that, and also put in place.

A mechanism for tracking those returns because and we have a methodology called ros return on sustainability investment that does that, where we've been working with a lot of different companies to test that out because it's just insane to me. Companies actually, even those with very robust sustainability strategies have not put in place the way to track the performance, the financial performance.

It's just bizarre. You won't get good decision making and good scaling and good ability to fight back against these criticisms until you start collecting this data. So that to me is another 

MPD: right. You gotta know that it makes you money. Yeah. Hey, we're doing things that are good for the world and that's making us money, that's making the company better economic.

Tensie Whelan: And not everything will make you money. Like when we looked at automotive, there were 18 different sustainability strategies. 16 of them made the money. So if they And the rest well, so what if you look them all together, they were making money overall. So you need to look and understand it holistically.

Yeah. Do you 

MPD: think they should still do the other two even if they don't make money on them? Yes, I 

Tensie Whelan: do. Because they were really, so one of them wa it depends on how important they are, but one was, for example, sourcing. Rare earth like problematic minerals and where you have massive environmental and social challenges if you don't do it correctly.

And yes, I think it was worth it, and it more than paid for itself with other investments. 

MPD: Okay. This is a big takeaway. Sustainability means improving the financial condition of the company through taking action to have better social and ecological and environmental. Yes. Love that. Okay.

Hard pivot. You're a rainforest expert. Is that fair? 

Tensie Whelan: I was, , Let me see what I, It's too far what the actual rate of deforestation is right now. I want now . 

MPD: That's okay. More, a lot more than all of us. What's going on? We hear that the forest is disappearing and it's bad. Yeah. Can you fill in the gaps on the macro narrative here of what's.

Yeah, 

Tensie Whelan: so forests, rainforests, but all types of forests. We're losing forests elsewhere. Why do we care about forests? First there are carbon sink, so they're a good offset against our carbon dioxide emissions. Secondly, They provide a cooling effect. If you ever go under the shade of a tree at a hot day you understand that microclimate impact.

And as we have more and more extreme weather and more and more heat from climate change, those Forested ecosystems become more and more important. In, in, if you just think about cities, right? Urban islands, heat islands, lots of concrete. If we green them right, we'll improve that. So forests can be really important from that perspective.

Also, in terms of biodiversity. Much of our biodiversity is found in these forests. And that biodiversity is important even if we don't understand why it's important. It's important and often in terms of the ecology and the ecosystem of how things work. But even in terms of caring for our own cells, we find a lot of pharmaceuticals, for example, out of rainforest, things that will help our.

So really important to protect that. And then also forests provide livelihoods for millions of people, right? Both indigenous communities who live in those forests and extract sustainably forest products. But even in. The United States where forests provide recreational and tourism opportunities or forest products against, for sustainably opportunities.

So I think really critical that we all work together to, to protect and regrow for us. 

MPD: So what's the solution? I know we've got a whole bunch of political red tape and Very rarely are the things that should be done being done. If you were the queen bee and you could, make a decree, what policy would solve this problem of the deforestation?

What do we need to be doing? Yeah, 

Tensie Whelan: so we can look to Costa Rica. I lived there back in the late eighties, and that was the Nader of deforest or the opposite apex of deforestation. It was, they had deforested most of the country and they had laws that encouraged it. Squatters got, if you can prove the land through cutting it down, you got to keep the land.

There were a whole series of. They turned that around dramatically. They did it through a number of different steps, and I think they all make sense, right? One is they created protected areas, but then in those areas that were not protected, they actually created incentives for sustainable forest management, sustainable farm management paying, providing ecosystem service, payment.

Two farmers and foresters who brought back the forest and protected the forest in a sustainable and responsible way. And that those ecosystem service payments came from the utilities. Like they run a lot of their powers from hydroelectric and those forests are really necessary to keep the water flowing.

So they're able to in effect, get resources to put into protect. Those forests, they also very purposefully looked for industries, light, light manufacturing industries that wouldn't have a negative impact on the forests. And then they supported through their own programs sustainable tourism, sustainable forest management, sustainable agriculture.

So they really invested in kind of corporate approaches to corporations that were gonna support their vision for sustainable. Another state, just like I, we have a house in Vermont and back in the 18 hundreds, almost all of Vermont was deforested. Now it's almost all forested, right? And so if you look, it doesn't have quite the diversity that it would've had two, 300 years ago, but it's still amazing.

And if you look at what's made that possible, it's. Zoning. Vermont is very strict about what it allows, what kind of development, where it's also national parks and national force that you're allowed to do logging, but in sustainable ways. It was really recognizing the opportunity for tourism like Costa Rica of their fall foliage and bringing people there for e for ways in which you can support the economy without extracting the trees.

So a whole series of benefits that you could take. 

MPD: It sounds like the headline though is generally government policy to enforce or encourage economically certain behaviors. Yes. And so for those who care about this mission vote, that sounds like the main thing most of us could be doing.

Yes. Thank you so much for being on. Appreciate you. It's 

Tensie Whelan: a pleasure. Yeah, no, it's been fun. And thanks so much for being interested in this topic and for all the work that you. Appreciate you. 

MPD: Thank you.

I really appreciate that conversation with Ancy. I think there is a, Between those who think sustainability is economically unviable and a potentially distraction, and those who believe it's critically important, regardless of the profitability Tai's framework brings them together, aligns things economically.

Obviously, I don't know if it'll apply in every circumstance and every opportunity, and they will have to continue to be go government involvement. It does give me hope that we can spread this perspective on how to think strategically about business and bring more people into this fold. If you like what you heard, please look us up with a like or a five star review and feel free to share with a friend.

You can find me on Twitter at mpd, and to hear more of my conversations with innovators, subscribe on YouTube or any major podcast platform. Just search for innovation with Mark Peter Davis.

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