Transcript
Dean Wehrli:
Welcome to New Home Insights, the John Burns Real Estate Consulting podcast about everything about the US housing market. I’m your host Dean Wehrli. Today we’re going to tackle another topic that’s a little bit outside of our normal housing purview, not so much, which we’re doing a little bit more lately, which I love. It certainly though has impacts on builders and has impacts particularly on the equity investor side of the housing sector. Today we’re going to talk about ESG. That’s environmental, social and governance. It’s basically this idea that accounting for the social aspects and impacts of investment activity rather than just accounting for that in terms of financial factors.
So think things like sustainability or social responsibility or best labor practices, transparency, things like that. It’s a massive movement, bigger than I realized it was. And it’s becoming a critical part of the investment world. To help us do that, we have Allen Hubbell and Shawn Hunter. They’re both with DuPont. That’s the Fortune 500 company you’ve for sure heard about, which you probably think of them as purely a chemical company. They actually make a lot of products that touch the housing space. Allen leads DuPont’s residential marketing team and Shawn is DuPont’s global sustainability director. Allen and Shawn, how you guys doing?
Alan Hubbell:
Hey, we’re doing good, Dean.
Shawn Hunter:
Doing excellent, Dean. Really appreciate the opportunity. And hello to everybody listening.
Dean Wehrli:
I appreciate you guys coming on. I’ve been wanting to do this for a long time. We’ve had some technical issues as you know in the past. But this is a huge, huge topic that I think is fascinating. Again, beyond even housing, I like doing these. So let’s first start with this. How about you guys just give us a quick little intro that’s better than mine about what you do, who you are, what you do for DuPont, and then we’ll get moving. Shawn, why don’t you go first?
Shawn Hunter:
Yeah, sounds great. So thanks again Dean. Really looking forward to today’s discussion. So I’m Shawn Hunter. I have the awesome responsibility of leading sustainability for our shelter solutions business within DuPont, which is our building and construction focused business unit. What that means is that I’m responsible for setting the vision, the strategy for sustainability for the business, ensuring that that’s integrated with the overall business strategy and then working with my fellow leaders and really across the business to drive progress against those goals, that vision. As part of that, I also have the great privilege of leading a small and mighty product stewardship team, which is a team of some very passionate and talented individuals that ensure that we deliver our commitment to product safety, product sustainability as well. So a lot of exciting things that I get to do here in DuPont.
Dean Wehrli:
Allen, how about you?
Alan Hubbell:
Yeah, Dean. Yeah, same here. Thanks so much for having us join. We really appreciate it. I’ve been with DuPont over 30 years. As you said, I lead the residential marketing team for the performance building solutions business. So those are products like brand names like Styrofoam, Tyvek as well as Froth-Pak and Great Stuff Pro. And so I get involved in marketing strategy, I get involved in digital marketing, communications efforts. I work with our communications team. And I’ve been doing this for over 15 years in the business. Prior to that I spent 10 years in sales selling into the glass industry. So if you want to talk glass, I can do that as well. But 25 plus years into building products. So I know the space fairly well and as Shawn said, really excited to talk about ESG and sustainability today. It is a hot topic, it’s getting a ton of interest, growing interest. And we’re all getting up the learning curve very fast and so it should be a really good discussion.
Dean Wehrli:
Shawn, I’ll have you talk to us about ESG a little more formally in just one second. But first I wanted to touch on Allen, you kind of touched on it just a second, Tyvek and Styrofoam. But what are some of the housing products that you guys do and how much of a part of the housing building process are they?
Alan Hubbell:
Yeah. So we basically make, the technical term would be air, water and thermal control layers. We’re managing air, water and thermal energy transfer around primarily the building envelope. And so that can take the form of wraps like a Tyvek, a mechanical wrap you wrap around the house, fasten it. You would seal it with tapes and flashings to get a nice tight home. You’d be managing water as well because water obviously causes durability issues, rot and you don’t want water to get where it’s not supposed to. And then the thermal. Then we have, whether it’s below grade or above grade, a product like Styrofoam, we also have a polyisocyanurate installation. But that’s going to manage your thermal losses across the building envelope. So primarily building envelope. We also have some spray foam products that you would seal openings to help prevent air infiltration, which of course is energy as well as moisture infiltration. So air water thermal is really where we play.
Dean Wehrli:
So almost the skin of the house.
Alan Hubbell:
Exactly.
Dean Wehrli:
Okay.
Alan Hubbell:
Exactly.
Shawn Hunter:
I would include add to that kind of from the overall shelter business perspective, we have sort of another half of the business that deals on the interior side. So our Corian design business, really focused on providing decorative surface solutions. And so you can think about your Corian countertops, your Corian sinks that I’m sure many listeners have. And wanted to mention that because a lot of the things that we’ll talk about today, we’re seeing the same thing on that part of the business as we are on the envelope side. In ESG, folks looking for climate circularity, chemical solutions. So we’ve got a good perspective from a couple different points of view.
Dean Wehrli:
Okay.
Alan Hubbell:
Hey Dean, one analogy. So you mentioned skin and one analogy, a picture I’d get in your listener’s heads is more of maybe a windbreaker with a sweater either underneath or on the top. So maybe like a ski jacket for keeping air, water and keeping you warm.
Dean Wehrli:
But not a sweater vest because I don’t get that. Your shoulders and arms have to be cold? I don’t understand sweater vests.
Alan Hubbell:
I don’t own a sweater vest, but that’s a good point.
Dean Wehrli:
I have never owned a sweater vest I’m happy to say. So let’s talk about my rough take on ESG. Shawn do about a job of telling the folks at home, what is the whole concept of ESG?
Shawn Hunter:
Yeah. This is such a great question, Dean, because I think there are a lot of perspectives of what ESG means and you kind of hear about it here and there. And it’s really important I think to differentiate between ESG and just sustainability overall. I think you actually did a great job teeing up ESG because you mentioned sort of the investor focus. And ESG itself certainly has gained traction as a term and concept in the investment community. So at its heart, ESG itself is really about providing risk information to investors. It’s about disclosure, it’s about transparency. And with that information, investors can take that and make the decisions that they want based on that info. I recently heard just a clear statement which was ESG is about transparency, not judgment. And I think that’s a good segue over into the sustainability side because when I think about sustainability, sustainability is kind of more about judgment in the sense that the overarching question is, are we doing enough collectively as a society to address our big sustainability problems? And as a business, how do we do our part to help solve those big problems?
So it’s kind of the spectrum. And if I think about what we do in DuPont here, certainly it starts with that latter focus, on what are our beliefs around sustainability. In our business we basically have beliefs that say, we know we’re not sustainable today, we know we need to do something about it and we’ve chosen to help lead the way. So putting all that together, if I think about ESG, I actually do start with the bigger, what matters most to us all perspective. And if you think about climate, it’s what do we need to do to actually manage climate crisis in the right way? An important part of that whole journey of course is the investment discussion and ESG of course, the disclosures are an important part of what we need to consider as we seek to get on a more sustainable path.
Dean Wehrli:
How about the governance part? That covers the environmental, the social a little bit. The governance part is more about labor practices. We’ll talk about that in a few minutes. But Tesla got in a little bit of trouble from with some ESG folks with that recently. But what is the governance part?
Shawn Hunter:
Yeah. The Tesla’s a fun one because it fits exactly into the distinction that I was just talking about. Well, the governance part, it’s really all the same thing whether it’s an environmental issue that presents a risk to your business or a social issue that presents a risk to your business or a governance issue. So do you have the right structure set up internally to actually understand and manage these risks? How are you considering these all the way up to the board and things like that? So regardless of which angle, it’s almost an articulation of the things that we’re used to considering from a financial perspective, we need to make sure we’re looking at other potential risks that could impact the business performance and then provide that information to investors.
Dean Wehrli:
So I think risk is going to be a big part of your answer here. But what is the primary motivation for financial players to be so concerned about ESG?
Shawn Hunter:
Yeah, absolutely. When it comes to the investment community, investment is about managing risk. And so ESG is just another lens of risk that can give them the information they need to make decisions. But if I then kind of parlay back to our conversation on sustainability, there are kind of the much broader considerations about sustainability and where you’d want to dive into that. So for us as a business, certainly customers are asking for it, asking for it more and more. We’ve got major influencers in our markets that are looking for example, more aggressive climate action. And our employees there, there’s just so much importance behind ensuring that we understand where our employees are at on sustainability and what they’re looking for us all to be successful. So we kind of embrace all of that. But on the investment side, definitely starts with the risk.
Dean Wehrli:
Is there any part of this that is truly, for lack of a better term, kind of green, that is to say motivated by, “Look, I want to do risk right with the world regardless or less so from a risk perspective”?
Shawn Hunter:
Yeah, absolutely. And that’s really again where we kind of start our sustainability strategy because we do see sustainability from the business perspective providing solutions that allow the world to better manage the climate crisis to better decarbonize as an enabler of our success. We see those trends, we see where folks are looking clearly for low embodied carbon materials. And so if we’re not tracking that and we are behind the curve, then we’re likely going to underperform. So it is strongly connected between doing right, understanding where those trends are hitting your market at the right time and then acting upon them. One of the things that we like to say, and this is straight from our chief technology sustainability officer Alexa Dembek, that we have to learn faster than the market is changing. And we’ll often talk about this decade as being the exponential decade. If you look at how quickly things are going to have to change when it comes to decarbonization, again back to the climate side specifically, there’s just a lot of change that you’d rather be in front of than behind if you’re going to be successful as a business.
Dean Wehrli:
I imagine you get some resistance in the sense of, should we trust you? Is there any sense that people are like, “Ah, you’re going to need to show me that you really mean this?”
Shawn Hunter:
Yeah, that’s a great question too. I think certainly one of the ways that we do that is it starts with our overall purpose of a company, which is to empower the world with the essential innovations to thrive, which sounds like a great little throwaway line. But we said if we do that right, we are actually having the positive impacts that we want. And you can imagine if you are an innovator, you’re a technical guru, nothing fires you up more in the morning than to know you’re coming to work to make a difference. And so that is the core of what we try to do.
And then the trick that you might be sort of highlighting is I can think of a million different ideas of projects we could commission to go solve sustainability problems. A fraction of those will actually be things that we can do to make money today. And maybe there’s something that we could do five years from now, but today’s not yet the right time to make money. Ultimately we are a business, all businesses have to be successful. So some of the trip becomes understanding when those trends are getting so strong that the opportunity’s real. But absolutely, as important as purpose has become to ensuring employee motivation and overall business success, that’s where it starts for us.
Dean Wehrli:
Okay. Okay. Allen, I’ve heard that ESG is either a really big part of the investment world or an absolutely massive part of the investment world. Things like 400 billion dollars or even six trillion dollars. Is there any sense of the size of ESG investing?
Alan Hubbell:
That’s a great question. I don’t have any hard numbers for you other than what I’ve seen from folks like the leader of BlackRock Capital, a large managed fund. He’s put a number out there in his CEO letter to CEOs and he’s put a number of 4 trillion. So I think whether it’s four or six, it’s a lot of money chasing sustainable investment. And he’s gone so far as to say it’s going to be the next big thing, bigger than digital, bigger than the social media search engine eras that we’ve gone through. And so I think the money is clearly, whether it’s a push or a pull, I’m not sure, but it’s clearly influencing companies and how they approach this area.
Your question was a good one. I was thinking about with Shawn, why should we trust you? There’s an element of both doing it, as Shawn said, because the timing is right, you can make money at it, there’s an opportunity, it’s the right thing to do. There’s also an element of, there’s governmental policy that’s pushing you in this area as well. And we certainly see that in our business. We have any number of innovations that are both we’re doing it cause it’s the right thing, there’s opportunity, we can differentiate ourself as well as quite frankly, we’re getting pushed a little bit. And so then you have to optimize and maximize that as well.
Dean Wehrli:
So both a push and a pull. You think that’s necessary to keep the growth, keep the momentum going?
Alan Hubbell:
I’m interested to hear what Shawn says. My personal opinion is, yes, I think you need both of those. I think at some point the opportunity becomes then big enough that it’s just self sustaining. Companies will do it because they see the opportunity there.
Shawn Hunter:
You started to talk about some really big questions, like fundamentally how do we navigate the transitions that are needed to be a zero carbon society? What does that roadmap look like from here to… When we look back in 2050, how will we have gotten there? And certainly the push, the pull, the dynamics that really constrain what a business can do and can’t do. How do we massage those to ensure that we’re moving fast enough in the right pace? So you do have of course the push, you have the pull. You have to have good crystal ball and confidence and, “I know this is where things are going.” And so one thing that I’d point out is just this year we’ve had just some really great climate discussions at the executive level on climate and we realized that our climate ambition was not aggressive enough.
And so that actually led us to make a commitment to increase our greenhouse gas productions goal in line with the science needed to limit global warming to 1.5 degrees C, which is the big target that everybody’s shooting for under Paris. We’re not yet for that. So we made that commitment. I can’t tell you we know yet exactly how we’re going to get all the way there, right? But we know that that’s undoubtedly again back to as fast as the market is changing, we know we’ll need to do that to be successful.
Dean Wehrli:
You mentioned that a minute ago that ESG is almost like the next tech, or at least the leader of Black Rock mentioned something along those lines. Do you mean that ESG is sort of a driver of new growth, new jobs? Is it something where we’ll be actually generating new and different jobs to add to the economy through ESG?
Shawn Hunter:
I might be a little controversial and say from the perspective of ESG being transparency and disclosure, that may be creating some jobs around folks who need to do some more reporting than we used to do. But really that’s where when you look at sustainable innovation, when you look at needing to learn faster than the market is growing and how things are changing, we do believe that the value creation structures are being changed as a result of sustainability, sort of the fundamental driver that’s making folks more interested in your ESG disclosures. But yes, there’s value creation. And so if you look at, and I know this is one of Allen’s favorite topics, but just decarbonization of buildings and what that means for electrification, you can think that the value creation opportunity that’s required to produce a successful building, a successful home a couple years down the road might be different than it is today.
Dean Wehrli:
Yeah, that’s what I meant. I did mean that. I meant jobs like in solar, geothermal, carbon capture, things like that. You’re right though, it might create a few more jobs of people keeping track of things. That’s not necessarily what we want though.
Alan Hubbell:
Hey Dean, another element here, another thought I had around your question of how big this is, Shawn and I were at a meeting over the summer with a number of large national public builders. And six or so of them in the room. I’m going to say more than half, maybe four to five of those folks had either the additional responsibility for ESG, sustainability or were new to the company specifically for the purpose of driving sustainable efforts in those companies. So that was quite a change. I’m not sure, Shawn, we were really expecting that. And so it’s a positive thing. I have not looked at the other whatever, there’s 18 or 20 public companies, how many have sustainable officers or have that role. But we were pleasantly surprised at that. “Wow. Okay.”
So residential had always had a bit of the reputation and maybe you’re lagging commercial, right? Commercial has some architects who are driving it, maybe some progressive folks there driving. And residential was a bit lagging. We saw that and thought, “Okay, maybe it’s the Wall Street money that is going to be an impetus here, a catalyst for residential to kind of move forward and catch up or at least move forward in a way that they haven’t recently.”
Dean Wehrli:
I’m going to ask you a really hard question so I have to ask it because that’s what I like to do just to make you guys squirm a little bit. But do you think that, in terms of his net impact, is ESG a net positive on the economy generally, or is it kind of neutral, or even some people might say it’s a drag? What’s your sense of that?
Shawn Hunter:
I’ll kind of pick up on where Allen just left off in terms of what we saw at that summit this year because again, that summit was one of the areas where we realized… Or we actually kind of brought that point of, “Hey guys, remember, ESG and sustainability are two really different things,” within that group where what we thought we were seeing was things like the climate, SEC potential rules that are out there driving more focus from some firms to just really look at their ESG reporting and start to issue their first ESG reports for example. Even though that might be about disclosure and transparency, that was leading to conversations around, how do we decarbonize? And hey, what is our leadership opportunity? And do we really understand if we take this action or that action, which one’s going to move us forward the fastest? That’s far beyond just let’s disclose some risk. That’s how do we think about action? How do we think about solutions? So from that perspective, we’ve got some anecdotal evidence that ESG is leading to that broader solution space thinking.
Dean Wehrli:
Let’s talk a little bit more about housing then, specifically housing. How does ESG impact? Sustainability has an impact on the housing sector, but is it also things like, I don’t know, waste disposal and building materials? What are some of the ways that ESG does impact specifically housing and building?
Alan Hubbell:
Yeah. I think it’s all of that. And Shawn can certainly weigh in. He has a ton of experience in the analysis of this. I’m sure he thinks of areas that I’m not thinking of. I tend to think of the impact on the building envelope when I think around the know energy efficiency and sustainability and the things we need to do to decarbonize. And obviously that’s where our products play. So that’s not self-serving, but it’s certainly myopic, right? That’s what I’m thinking about. And so in my mind, to meet many of these goals and to be able to offer up a more sustainable world, we have to improve our building envelopes again, whether it’s air, certainly you have to manage water because as you tighten up building envelopes, as you add insulation to them, all of that contributes to reducing the drying capability, drying capacity of the wall.
And so if the wall gets wet, boy, it takes even longer to dry because you have less airflow, you have less heat energy. So what that means, so it puts a premium on water management and then you have to tighten it up because to take advantage of these other technologies like heat pumps and so forth, they don’t necessarily perform like a fossil fuel furnace and they’re not going to heat the house up as fast for instance. And so if you have a poor performing building envelope, you’re going to be very disappointed in what you perceive to be the performance of your heat pump. And it has nothing to do with the heat pump, it has to do with the building envelope. So in my mind, I tend to go there first. Just, one, it’s kind of my job to think about that stuff. But certainly those other areas, chemicals of concern and recyclability and so forth are also areas that folks are interested in too.
Shawn Hunter:
Yeah. If I kind of start with our overall business sustainability strategy, it’s to partner with our customers and the industry to drive the total carbon of buildings to zero, to advance circularity in the industry and to use green chemistry, safer by design solutions to enable the industry. And so Allen, I love the way that Allen thinks about how important the building envelope is in managing decarbonization and our climate goals. Because as we know and we love to say, if you look at all the greenhouse gas emissions globally, about 40% of them actually come from buildings, something like 11% related to the materials themselves and the rest due to operating the building, running your HVAC, those sorts of things, electricity, all of that. And so it’s really important to keep the climate approach from a decarbonization electrification part in mind just based on the role that the industry plays in that particular issue.
But if you look at the other sustainability dimensions, you look at the circular economy movement. If you think about waste, waste is a human concept. There’s no waste in nature. So how do we get better at that just in our material economy? And we are seeing a lot of increasing demand for products that have more recycled content. And how do we also use our building science knowledge and our innovation capabilities to take waste out of the value chain? Maybe we’re selling a countertop and that material’s being modified and there’s waste in the value chain. So what do you do with that stuff? And then at the end of life, ultimately, how do you bring everything back? I’ve loved this concept that I think started in Europe around buildings as a material bank. We do have finite material resources. So shouldn’t buildings just be like a store of materials that we use while they’re a building and then we reuse them again later? So some idealistic cradle to cradle sort of things. But ultimately those aspects of climate circularity and chemicals certainly drive a lot of the demand and the discussions that we have.
Dean Wehrli:
Let me ask my question for a minute ago, but specific to housing. That is, is there a neutral impact or even a positive impact on the economy? Let’s ask that specific to housing. Because let’s be honest, you can see a lot of the builders can go, “Oh, you’re costing me money having to worry about waste disposal, et cetera.” Do you get a lot of that or do you see ESG’s impact on housing specifically as being at least neutral?
Alan Hubbell:
I see. So I’m not sure I’m answering it exactly, but if the question is, am I going to have to pay more for these sustainable features or performance? I like to think of it, I would suggest maybe the question is, “Am I willing to pay for that value that’s delivered?” And so in other words, we all live in homes that are better than they were a hundred years ago. We’re paying a lot more for them. We’ve made that decision that we’re willing to pay that for those extra features and benefits. Same in the car industry. We’re paying more for cars today than we did 30 years ago and we have more advanced systems in them, better comfort, better performance, you can go 7,000 miles between oil changes now. And we’re willing to pay for that. So if there’s resistance, it’s because the folks don’t recognize the value that might be there.
So I think if you can demonstrate the value that’s there, I think there’s more than ample opportunity to make that sale, if you will. And certainly some builders are on the cutting edge of that. There’s some small, innovative, really green focused builders out there. Some of the large public builders now, as we mentioned, are focused on ESG and are getting driven to it from Wall Street and money that they’re looking at that’s going to drive them there. And so I think other builders are going to have to. And then you have government policies driving energy efficiency. And so if I’m a builder and I’m in the middle here, not quite sure what to make of it, the world’s changing around me. I think there’s so much inertia, I think you’re going to have to pick your head up, look around and figure out where you want to play here.
I think they’re going to have to, because, and Shawn touched on it earlier, not only is the market, there are potential consumers, homeowners moving that way, but there are employees. Shawn runs a monthly meeting that, no offense of my other colleagues and the rest of our business, but it is a great meeting. It’s focused on sustainability. He has great attendance, he makes it fun. There is so much energy on that call I think because folks really want to make a difference here. So if I’m a builder, a smaller builder in a local market, the folks I’m hiring, they want to make a difference too and feel like in their job. So I think I would not underestimate the impact that the employees have on driving this as well.
Dean Wehrli:
That’s interesting. I don’t really think about… I think about what you said a minute ago about buyers though. Do you get the sense that buyers are pushing the home builders whether they like it or not to follow up these policies?
Alan Hubbell:
Yeah, the home buyers. In some respects, it’s expected. Nobody expects to buy a home with windows that leak air. They just don’t. “You mean I got to pay more money for a better window?” That’s a really delicate conversation to have. I have them in my house. My windows are horrible in my house. I wish I had put a little more money into them.
Dean Wehrli:
Well, you’re the glass guy. How is that possible?
Alan Hubbell:
Exactly. Exactly. Right, right. So yeah, that’s a tough conversation to have. I think it’s kind of expected. That’s why I think the market’s going to move the builders. If you’re a buyer, potential buyer and you’re going to look at a home, and there are big builders doing this now, a couple of them come to mind that market themselves as kind of an energy, it’s almost like a miles per gallon thing. They’re so many dollars per month in savings or cost. Well, that’s going to get your attention. And any more, we know the biggest builders are continuing to increase their share of closings in the market. So I just think it’s driving in that direction. If you’re a smaller, generally smaller builder building in a single market or two, you’re going to have to make a move here and figure out how you’re going to build over the next five to 10 years.
Dean Wehrli:
Yeah, Meritage comes to mind. One of the biggest home builders in the country. And they have been focusing on that efficiency for a long time. And they do exactly what you said. They advertise it very successfully too-
Alan Hubbell:
They do.
Dean Wehrli:
… by the way. Let’s talk about-
Alan Hubbell:
I would just say just to be fair, KB [Home] is another one. They got get into it very early. Beezer Homes is making a huge move towards net zero energy by 2025. They put a stake in the ground, announced it in their annual report that they’re going to be net zero. So this net zero drive, it’s coming. We’re in the early stages of it, but it’s definitely coming.
Shawn Hunter:
There are just so many increasingly sustainability focused builders I think. Some of these aspirations are as aggressive, as ambitious as what we’ve seen in the commercial market just in terms of their drive and what they’re trying to achieve. And we look at that and say, “Okay, great, our vision’s aligned. How can we help you? You want to achieve this type of HERS rating? How can we help you get there?”
Dean Wehrli:
Okay. Okay. Yeah. Again, more and more it’s going to be the absolute norm. If you don’t do it, you better. As opposed to, “Hey, we do more than anyone else does.” Let’s talk about some of the pushback though. So California had its decision. They made a policy that all cars will have to be electrics sold in California I think by 2035 if I remember that correctly. There’s been barely a peep about that. There hasn’t been that kind of a reaction, at least not yet. But there has been to ESG. There has been a movement in some states to sort hit back against ESG. Does that concern you? Do you see that being a major impediment to ESG going forward?
Shawn Hunter:
I think any major transition goes through its ups and its downs, and getting everybody aligned on a single thing is always impossible. But I think I keep coming back to climate, just because it’s so central to our industry. Recent climate week discussions in New York, and as we look to top 27 this year, the longer that the world stays off track to manage the worst impacts of climate, the more the pressure will increase. And so you’re kind of either reading that crystal ball or you’re not. But that’s certainly the basis for our strategy.
And so if that’s sort of a fundamental trend for where you’re going, then the rest just kind of follows to it. And there will be the folks that you want to collaborate with who need your help to enable their goals, as we were talking about, and other folks who might not pay attention. But when we think about sustainability and ESG, absolutely an enabler of our overall success as a business and in some sense you might say why we’ve got sustainability and innovation paired in Alexa Dembek’s role. The two are just so fundamentally linked as an overall business success enabler.
Dean Wehrli:
It has made for some strange antagonisms though because like you said, BlackRock, these are huge international investment vehicles and they’re under threat by some of these states for doing what they want to do, which they think is in the best interest of their investors. It’ll be interesting to see how that plays out. Like you say, it’s so big. The momentum’s there, already it’s a falling snowball, whatever the dumb metaphor is. You can push back, but it’s not going to work.
Alan Hubbell:
That’s where I’m at, Dean.
Alan Hubbell:
Sorry, Shawn. Yeah.
Shawn Hunter:
No, you’re good. It’ll be really interesting to see again how these SEC climate disclosure rules evolve and are adopted. In parallel. I know one of the questions, there’s certainly an alphabet soup of sustainability. There’s an alphabet soup of ESG. Yeah. And the reporting frameworks and the TCFDs, the SASBs, all that stuff. There’s the work that was launched last year or on the ISSP which was the International Sustainability Standards Board to harmonize ESG frameworks. So their goal is to get everybody speaking the same language when it comes to ESG, because we’re not there yet.
Dean Wehrli:
That was kind of my next question, Shawn, is that we had Tesla kind of punished for the governance part of them. With electric cars, they’re on the good side of the other parts of ESG. It seems to be some other groups didn’t sort of downgrade them. Is that going to harmonize? Is that going to sing from same hymnal eventually?
Shawn Hunter:
Yeah. Yeah. The Tesla example’s fantastic. And Elon Musk doing what he does, I think for folks that might not be as familiar, basically it was the S&P 500 Sustainability Index. Tesla was booted out and some other companies were allowed in. And the response was, “Well, hey, if we’re doing so much good to help drive climate action in the sustainability sector, how is ESG any good?” I think he called it a scam or something like that. So some very lively tweets and means Elon doing what he does best.
Dean Wehrli:
Elon often doesn’t help himself on those things. He should get his fingers away from the keyboard once in a while.
Shawn Hunter:
Right. But at the heart of the issue though was where we started, that ESG is not about rewarding companies inherently for doing awesome sustainability things. It’s about putting information in investor’s hands. And so some of those companies just had more robust disclosures than Tesla. So that’s the way the system is kind of set up right now.
Dean Wehrli:
Okay. There is a little bit of disparateness to ESG. Not all of those things fit perfectly and neatly together. Especially the G part I feel like is a little bit, not separate, but a little bit different from the E and the S part, the environmental and social. Let me ask two more questions. One is going back to consumers, investors are interested in ESG because it does best buy their investors. And investment folks want to give the best return on their dollar. And they think ESG policies will get there because it lessens risk, et cetera. What about consumers? Should consumers care about ESG and be interested in furthering ESG from a consumer standpoint.
Shawn Hunter:
Yeah. But maybe Allen, I’ll start, I think as an inhabitant of this planet, you have to care. If you look at what’s going on right now, the impacts from the climate crisis we’re already seeing, the droughts, the wildfires, the heat waves, the increased storm intensities, the fact that Pakistan was a third underwater from recent flooding and it’s going to take forever to recover, just insane things that are going on. As that continues to happen and as we go from 8 billion to 11 billion people on the planet, we’re not going to be happy if we don’t figure that out, if we figure out a way to manage that. So that that’s kind of on the, hey, just good human side of things. But on the consumer, looking at your pocketbook impact, think about the increasing supply chain disruptions that might happen, the increasing cost pressures, and just how impacted the economy could continue to get based on these sorts of events that would continue to happen. So I think from both the good human and the pocket book perspective, there are some good incentives to want to care about things like ESG.
Dean Wehrli:
I hope you’re right. I think you’re right.
Shawn Hunter:
We are a science based company, so at DuPont there’s no question.
Dean Wehrli:
There’s a lot of folks who aren’t a science based so even… Let me ask you one last thing, I think it’s probably best for Allen. Can you give us a peak, and Shawn too actually, what might be happening next from DuPont along the lines of ESG, whether it’s sustainability or what have you? Anything, kind of a future little sneak peak?
Alan Hubbell:
Well, certainly the focus on reducing carbonization, right? Lowering carbonization. And so whether it’s through new products, new solutions meaning some application innovations maybe with existing products, maybe in the area of fire could be an area of interest for us. Again, we think about products a lot. We also think about application solutions. And so there’s a fair bit of innovation that goes in there. How do you keep water out of increasingly complex designs of buildings or roofs? Think about how complex roof lines have gotten over the last 20, 30 years. How do you keep water out? How do you keep air out? How do you make all these materials work together? It continues to be a challenge with what architects want to design and what folks want to live in.
And so I think continuing to decarbonize will be a focus for us, and that has impact whether it’s in the products we sell or in the operation of the buildings. It could be that a particular product isn’t necessarily any less carbon than another product, but it’s performance over the next 50 to 75 years makes a huge difference. And as Shawn mentioned, we think the big levers are there in the operational side, at least in residential. But there’s opportunity everywhere.
Dean Wehrli:
Yeah. Shawn, anything else?
Shawn Hunter:
Yeah. I know that one projection is that Allen’s going to have the most sustainability robust marketing plan for 2023 that we’ve ever seen. But beyond that, I think Allen really kind of-
Dean Wehrli:
That sounds like a little internal stuff going on there.
Alan Hubbell:
Challenge accepted.
Dean Wehrli:
Yeah, okay.
Shawn Hunter:
It’s a challenge and really to all of our marketing leaders in the business and across. But I think Allen hit it. It’s really more efficient buildings that use low embodied carbon materials as we increasingly decarbonize and electrify to get there. So what I’d say is we just had some really great success with products that have been winning sustainability awards. And if we look at things like our low GWP Froth Pak spray foam installation that reduced the blowing agent, global warming potential by over 99%. Our innovative Styrofoam that reduced the embodied carbon by 93%.
Allen I think mentioned the Thermax NH product earlier, our non halogen class A polyiso board that is a finalist for a sustainability award. And hopefully we’ll see where that goes in October. But we’ve got a track record of really bringing out some great sustainable innovations. And we’ve got just a whole bunch more in the pipeline that we’ll be super excited to share with folks as we go. But yeah, just more of the same. We’ve got, again, just climate strategy. We’ve got goals focused specifically on climate circularity and chemicals, and I just can’t wait to share the things that we’ll be doing when we bring those out.
Alan Hubbell:
Yeah. And I would also add that obviously none of this is done in a vacuum. So to the extent that we can collaborate with others, your listeners, whoever might be out there, it’s going to take all of us to make an impact in this area. And it’s not necessarily going to be only a scientist in the lab creating a new material, right? New solution. And because we’re at the early stage of this, there’s so much to learn. And I think we all have to learn together. And that’s where we’re at right now. As Shawn mentioned, we’re trying to learn faster than the market’s changing and we’re getting up that learning curve and we think we’re doing a good job, but we can always collaborate with others and partner with others to bring these solutions to the forefront.
Dean Wehrli:
I’m glad you’re doing it. Go ahead. Shawn, go ahead.
Shawn Hunter:
Allen, I think that comment is just so important because be it a big sustainability challenge, we know that nobody can solve any of the stuff on their own. But for us, we’ve been very intentional this year about trying to engage in sustainability conversations with our customers, our partners, our influencers because at the end of the day, it’s really just about knowing where things are going and knowing where we can really help our customers who are looking for us to help them. So we’ve had a number of conversations. I can only see those really sustainability focus conversations continuing to increase and expand and inform our strategies. And kind of back to the marketing plan comment for Allen, right? Part of his job is to help synthesize all that stuff together and figure out what we should go do. And for me, that’s where a lot of the exciting magic happens. So yes, much more collaborative type energy that we need to harvest.
Dean Wehrli:
Allen, you’re on watch.
Alan Hubbell:
I am always.
Dean Wehrli:
Okay.
Alan Hubbell:
That’s right.
Dean Wehrli:
I am glad both of you guys are doing what you’re doing. I’m glad DuPont is doing what its doing. And I’m sure this has happened on lots of companies across the world, but this is good. I hope we see sustained ESG in the future. Allen and Shawn, thank you guys so much for coming on. I love doing these episodes that aren’t exactly just perfectly kind of a little bit of a round peg and a square hole, but they’re fun. Thanks a lot for coming on.
Alan Hubbell:
Great. Thank you, Dean.
Dean Wehrli:
Absolutely.
Shawn Hunter:
Absolute pleasure, Dean.
Dean Wehrli:
Thank you guys. This is Dean Wehrli for the New Home Insides podcast. We will see you in a couple of weeks.
