How ESG reporting is accelerating corporate sustainability efforts

Understanding that you haven’t been through the detail of the SEC announcement [published the previous day], are there any themes or messages you want to share as you consider whether to respond to the proposal?

Dell is supportive of the required disclosures in this area.

We intend to submit a response to the SEC proposal, and our initial view is that we’re pleased to see that the SEC took into consideration many of the concerns that companies raised, such as:

• Basing the disclosure rules on a globally recognized framework such as the TCFD as we have global operations and want to align
• Phasing in both the disclosures and assurance requirements as we need sufficient time to establish controls in this area and aggregate third-party data on a timely basis
• Including a safe harbor provision for Scope 3 and forward-looking information as this is a new area for Finance and is expected to result in companies being more willing to put this information in the filing sooner than required

What does the involvement of the finance function look like at Dell for ESG reporting? Has it evolved in the last year?

Dell has reported on sustainability since 1998. In the past, our finance function focused on governance, data quality analyses and consistency of methods applied to create the KPIs. Over the last two or three years, however, finance function involvement has increased. We’re gaining a deeper understanding of the sustainability process.

Under the chief accounting office, we created an ESG controllership function. The design of that function is to collaborate with the ESG team for integrative reporting.

How closely do you work with the ESG team?

We work with the ESG team both through daily engagement and more formal cross-functional teams, especially as it relates to governance. The ESG team brings certain expertise that we do not have, and our skill set is complementary in getting prepared for inclusion of this information in the 10-K.

What, if anything, have you been doing differently this year when preparing your 10-K (filed two days after this webcast) as it relates to ESG reporting?

We spent a significant amount of time going back to the SEC 2010 guidance, as well as the speeches and the comment letters that they provided around climate over the last year or so. After analyzing what they were signaling, we made certain choices, such as changing some disclosures and expanding other disclosures.

We also looked at the microenvironment. Human capital issues such as the COVID-19 pandemic, attrition, employee wellness, safety and social injustice needed to be reflected in our disclosures. 

As a private organization, what drives you to have ESG disclosures? Why is it important to Cox to spend time and resources on ESG?

We’re not only private but also family-owned, so our heritage comes from family values around sustainability and community. We’ve had net zero goals around wastewater and carbon for 13 or 14 years.

Disclosing ESG data for public consumption is important to us, regardless of whether we are “required” to do so.

What have you learned from building out an ESG strategy?

We learned the value of a materiality assessment. We are a conglomerate with several business units, and ESG reporting materiality is industry specific. The assessment allowed us to be transparent with our stakeholders, while also showing us the opportunities that are out there.

When you really understand the materiality of various ESG issues and then dive into the puts and takes within the data, you find it’s not chasing data for the sake of data. It allows you to understand the true cost and benefit of the businesses that you operate and where to go after making improvements.

What have been some of the reactions from your different stakeholders?

They’ve been incredibly positive. For example, we recently launched a social impact goal. As we were growing and trying to measure what we hoped the world will become if we are successful in our initiatives, we realized there was an opportunity to stake out a higher aspiration. The goal is to empower 34 million people to lead more prosperous lives by 2034 which aligns with a business growth goal for us.

Have you seen Cox use ESG as a lens for strategic decision-making?

Yes, absolutely. One of our aspirations is to have a third division of our business dedicated to clean technology because we believe in environmental protection. Cox Automotive is also an example within our traditional business. As we’ve been watching the electric vehicle space grow, we realized one of the big challenges is related to the secondary life of batteries. We’re making a lot of investments on how to extend the life of a battery and recycling opportunities.

As a private company – is the finance function involved much in ESG at Cox?

The finance function has been involved particularly in the last 24 months or so. As a private company, we still pursue bonds to support our capital projects, so we’ve been able to partner with Treasury and our finance team to determine which capital projects can help us with our social investments and what data the banks would be interested in.

We’re just starting to scratch the surface in this partnership.

As Brightstar hired you last year to lead sustainability efforts, what were some of the first steps to get acclimated?

Since our firm was founded in 2016, we’ve had an ESG policy. I came in to develop in-house expertise, to be more strategic about how we think about ESG as a lens of both value preservation and value creation and to be a resource to our deal teams, our portfolio companies and our investors.

My first step was to update our investment process to include an ESG lens at every stage.

How would you distinguish if or how you think about ESG at the consolidated parent organization, and compare that to the portfolio company level?

At a minimum at the general parent level, it is important for us to see companies that minimize impact on the environment, promote social cohesion and create good governance models.

My focus has been on our portfolio companies as they employ about 18,000 people across a span of sectors and we primarily invest and partner with middle market firms. One area I’m very interested in is energy efficiency. I think every portfolio company should have an energy efficiency plan. I also am looking at the “S” of ESG – specifically turnover, talent attraction, gender parity and retention.

Are you seeing ESG as an important element in the investing decision process with Brightstar? How does ESG factor into due diligence?

Our goal is to work with our partners and investments to build companies that are sustainable and long-term oriented. This involves dissecting the “E,” “S” and “G” and the relevance to each of our portfolio companies.

When exiting investments, how do you think ESG is being considered by the buyer, or what you do as a seller?

Historically, ESG was just seen as a risk mitigant or way to exclude bad investments. Over time, we’re seeing movement away from value preservation to value creation. We think about making an investment based on analyzing an industry and whether a company contributes to ESG goals.

Do you have any goals for 2022 as you look towards the rest of this year?

I want to continue to build and implement our strategy by working with our portfolio companies to build out their ESG strategies. Two areas that are important to us are energy efficiency and people.