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Hi, I’m Julie Bennett Bunuan, head of ESG Advisory at Truist Securities. I’m here with Meg Boyles, ESG/Environmental Advisory Consultant at Truist Commercial Community Bank, and Lissa Miller, head of Supplier Diversity at Truist. 

Today, we’re here to talk about how supply chains are such an important driver of ESG. I think it’s worth starting with a quick overview of ESG to set a level playing field of what we’re talking about and also maybe demystify a couple preconceived ideas about it. 

First, ESG—these are environmental, social, and governance factors that companies are increasingly focused on and reporting their alignment around. These factors are important to a number of stakeholders and [are] ever growing. These can be investors, customers, [and] suppliers, as well as regulators, employees, and the communities in which businesses operate. 

Companies are making commitments around these factors, including the reduction of emissions and promotion of diversity. And supply chains are often a key component of how they’ll meet these goals. This focus on supply chains is also leading to an increased need for transparency. 

Meg, I’ll turn to you first. And often, many of the companies you speak with are suppliers—some of these larger public companies that are making these commitments. How do you see the understanding of ESG and response to it within your private-company universe? 

Yeah, it varies a lot, for sure. So, one thing that is common is [that] most of them are doing something related to ESG already. They just may not refer to it that way. So ESG is obviously very broad. It includes everything from their energy management, [and] their supply chain, to their employee engagement. So generally, parts of that are within their strategy. 

One thing that we’ve been hearing from B2B clients more often is the desire to be able to tell their story to their clients. So, to be able to explain what is their diversity, what is their focus on the environment—because they are hearing from their clients, “How is that going to fit in with my strategy”? 

Where do they see the demands or challenges [being put] upon them in terms of their customers—of what they’re being asked, and how they’re able to respond to those needs? And do they also see it as an opportunity? 

So, the main feedback we have received is that it’s more of a carrot than a stick. So, they are hearing from some of their customers [about] what they’re focused on, whether it’s diversity, emissions, [or] energy usage. But they aren’t today saying, “I’m not going to continue to do business with you.” But they might be asking, “Do you have a plan?” and [saying], “We care about this.” 

And so, what companies need to keep an eye on is, if today it can be a competitive advantage—because they’re telling you they care about it—in the future, is it table stakes? Because everybody’s been moving along this journey, and we don’t want anybody to be left behind. 

I would definitely agree with that. When we’re asking these questions initially, it’s like, we’re just trying to find out where our suppliers are. But at some point, it will be table stakes. Because as Truist, we have greater expectations placed on us, therefore we have to pass some of those expectations on to our suppliers. 

I think that’s a great lead-in to share with us. At Truist, how does ESG come into play as we think about supply chain resiliency and sustainability and particularly the inclusion of small- and diverse- owned businesses? 

Well, at Truist, we are really trying to build a sustainable supply chain. And that includes working with diverse and small businesses. Sustainability is something that we’re all grappling with. How do we ensure that we have a bench of small and diverse suppliers to continue to do business with over the years? How do we grow these businesses so that, at some point, they can take a leadership role in our supply chain? 

How do we make sure that these businesses have the cash flow to be able to continue their operations? How do we make sure that they’re aware of ESG commitments that we’ve made and things that we’ll be asking them to do in a longer-term fashion, as far as being more environmentally responsible? 

So having a sustainable supply chain just gives you a great competitive edge. It enables you to be able to have the supply for your business and for our business, especially, so that we can meet the needs of our clients, our internal operations, our stakeholders, and the communities that we operate in. 

Are there challenges you find are more common across some of the smaller businesses that you’re looking to bring into the supply chain? 

Yeah, as far as ESG, I think there’s a whole educational component that really needs to be dealt with. And a lot of these businesses, they’ve managed to get through the pandemic. Kudos to them, because that was a very arduous task. And so now we’re going back to these businesses to say, “Let me educate you about ESG and those commitments that we have made as Truist.”

And educating them as far as what are some actions that they can do today to become more environmentally responsible and socially responsible. A lot of them are already doing the social part, because they do hire from their communities, and they have very diverse communities that they usually hire from, but when we talked about what does ESG stand for, and there’s a … you were speaking, Meg, about [how] some people define it differently. How do we give that understanding to these diverse and small businesses? So, they know what ESG is and maybe some of the resources that they could go to to get more information about it and see how they can incorporate it into their own operations. 

I think you raise a really good example of customer-led engagement and education. And [to] turn it back to you, Meg, how would you maybe compare and contrast the journey of private companies compared to public companies? 

Yeah, education, as Lissa mentioned, is definitely huge. The scope is also a little different. So, we aren’t necessarily talking to privately held companies and saying, “You need to have a fully dedicated sustainability partner. You need to have all of these resources on staff.” They might not have the scale for that. 

And so, instead, it’s understanding what are your customers doing and asking. Moving to that piece. Understanding what your competitors are doing and then focusing in on a few things that they can do. And maybe not diving too far into needing to report all of their emissions immediately, but instead starting with energy management or waste management—something that’s closer to home for them—and building over time, versus needing to think about a full ESG report, as is more common in the public companies. 

No, I think that makes sense—the stage-stepping into it. And I think even for the public companies, if you boil the ocean and try to be everything, it’s not credible; it’s not authentic; and it’s actually not relevant to a lot of people. And the further you get away from your business and the relevancy, [the more] it loses its value. 

So, we spoke about the increasing need for transparency. What’s some of the broader context from the public-company perspective? 

You’ve talked about table stakes. It’s certainly an opportunity to grow the share of wallet and value with the upstream buyers and customers—that certainly this is something where, if you have a more sustainable product, service, or solution, or you’re able to produce that with less waste or a lower carbon footprint, it’s a diversifying opportunity. 

And these companies are certainly looking for more suppliers that fit that, as well as, as Lissa was saying, our focus at Truist around diverse owners. “How can we support those?” is a question that many companies are asking, and actively looking for the broader supplier base. 

We’ve talked a few times around diversity, environment—ESG all gets muddled together, and we sometimes get asked, “Do you only care about the E?” or “Do you only care about the S?” I think it’s a question I’ll just share—maybe, Lissa, to hear your perspectives to share with the audience of how do you think about supplier diversity? 

If we’re focusing on supplier diversity, does that preclude looking at getting data points about environmental and vice versa? Is there an interplay? Or is it one package to be considering? 

No, there’s definitely an interplay. Supplier diversity has been around for a long time. So, companies are very familiar with supplier diversity and what some of those standard terms are in the supplier diversity world—you know, “What does it mean?”

But I think ESG—coming to them and actually providing them that education on what does that E stand for? And what is the expectation around E, the environment? And so, really, it’s more of getting an understanding of what our suppliers are doing and really sharing knowledge with each other to help build each other up in this space. 

And that really speaks to some of the transparency—increased need that we’re hearing—whether it’s from the supplier or from other stakeholders. Julie, how are you seeing that component when it comes to public companies? 

I think a large factor hanging out there for later in the year is we’ll see the SEC publish guidance on climate-related disclosures. And for those publicly listed companies, that means they’ll be looking increasingly to their suppliers to understand how they feed into the broader carbon footprint of companies that are needing to report this under the SEC guidance. We’re also seeing companies—they’ve made commitments around these fields, but they’re also leveraging how they’re thinking about some of their financing. 

So, in the spectrum of sustainable finance, there’s an instrument called a sustainability-linked loan. And this is a loan where the interest is linked to achieving ESG goals. And where we may have seen that first being mostly environmental—maybe diversity within your workforce—we’re now seeing the incorporation of benchmarks and goals around supplier diversity or supplier engagement. 

And we’re also seeing the development of supplier finance programs that are also aligned with these goals, which all of this requires transparency, but it could mean that if a supplier is able to share their carbon footprint, are they able to get better pricing because they have a more sustainable operation than another [supplier]? Or are they a diverse or minority supplier, and are they then able to also access preferential pricing to meet those goals? So, all of it comes back to data in many of these conversations that I know we have. 

And I think it’s also … when you mentioned that opportunity, and that’s something that small businesses really need to hear. By telling their story and being transparent and sharing that information, they could capitalize on that opportunity to get that financing. 

Thank you, Meg, Lissa, for taking the time to talk today about these complex and nuanced issues. As this conversation shows, we’re here to engage in this dialogue with you and to be an advisor as you navigate your journey and the opportunities around ESG. 

And as you heard today—and as you’ll continue to hear from us—we’re here to also share our learnings as we navigate this ourselves as Truist—our own commitments and progress. So, thank you for watching and [we] look forward to engaging with you soon.