Difficult Discussions that Move the ESG Needle ft. Chantal Beaudoin (Knight Frank Investment Management)

This episode of The Resilience Report is really a special one for me. I met Chantal Beaudoin over 15 years ago when we were both studying at university here in Montreal. Chantal was absolutely one of the first people I met that was combining the idea of business and commerce with sustainability. It was through our conversations that I was really able to successfully set out on my own path of trying to discover how these worlds can intersect. Seeing how she has moved through various Industries since then has been really inspiring. 

Who is Chantal? 

In her own words, with climate change as the biggest environmental crisis of our time, Chantal has designed solutions to activate sustainability across the globe. She has implemented projects with momentous impact tracking CO2 equivalents and benefits to people and communities along with cost savings as key success metrics. With over 15 years of experience building and delivering large-scale sustainability strategies, Chantal has experience in the real estate, hospitality, and higher education sectors. Chantal’'s resume is quite remarkable and includes highlights such as having launched the world's first Whole Life Net Zero carbon hotel as well as overseeing packaging and recycling as well as SBTi climate goals for McDonald's UK just to name a few. 

And now, over to our episode.

[Host: Lauren Scott] Welcome, Chantal, to The Resilience Report. Thank you so much for joining us!

[Guest: Chantal Beaudoin] Thank you for the invitation.

Would you be able to provide a little bit of context as to who you are and what you do?

I'm originally from Montreal, Canada Quebec, but now living in London UK.

I've worked in sustainability / ESG for the past 20 years. That has meant working across different sectors and countries from higher education to fast food and now in real estate both across the UK and Canada.

I am now working for Knight Frank Investment Management as the head of ESG where I'm looking after the strategy and implementation of sustainability across 300 buildings in the UK.

You mentioned it's been 20 years now that you've been working in sustainability. The topic, especially ESG, is top of mind for so many companies right now. But it hasn't always been the case. How has your journey progressed over the past couple of decades?

So I was studying in a Bachelor's of Commerce at the University of Concordia and I had never heard about sustainability. This was back in the 2000s, and I was introduced to what was referred to the “Egg of Sustainability” where you see the interconnection of the environment within the society, within the economy and how they interconnect. Through a class project, I actually got involved in the first campus sustainability assessment. Some of my recommendations were adopted by the management of the university. I think that was the spark for me to empower my career in sustainability: having a financial benefit/impact and social impact that really contribute to people and the planet and business together. 

It's pretty remarkable because not every student is thinking about sustainability. In fact, they're thinking more about their next exam or even the latest bar that just opened in the neighbourhood. So it's very unique. What got you interested at such a young age in terms of sustainability?

I credit my career in ESG to two women: Melissa Garcia Lamarca and Geneva Guerin. They came into one of my business classes and presented this Egg of Sustainability and gave us the students the opportunity to work on the first campus sustainability assessment. They had received $25,000 Canadian dollars in 2003 to produce this assessment and they were working with the university management and professors to recruit over 100 students to work on this project. 

And really that project that enabled me to get involved in sustainability and start seeing my powers of change and my ability to create positive change within my campus and then which became my career.

It is an interesting transition too because you started your professional career in higher education. Did you already know then or foresee that you would transition over to the private sector?

So I've always loved working in universities because that's where innovation can happen. There's this energy of the students that really kind of wants to make a change. It's the ripe environment to create sustainability impact. I stayed in higher education for over 14 years, so after Concordia I went to the UK and worked in different universities here. It was only kind of after one of my contracts ended where I thought okay I've I've worked in here and and I'm getting older and my energy shifted. I wanted to start kind of moving into the business sector which was my undergraduate degree. But it was really challenging: I spent over 6 months applying for roles and being rejected and being told that my experience in higher education didn't translate to the business sector.

So it was hard to be taken seriously in the business world. But McDonald's was the first to give me that opportunity and to take the work that I had done in terms of Waste and Recycling and and climate and put that into the restaurant in the UK. To be completely honest, I was really ashamed of that move. It took me over 6 months to even post on LinkedIn or announce it to my network. It felt like I was kind of it, felt like I was perhaps going into the dark side. 

And actually it really took me to you know be embedded in the role in where I was part of the supply chain team to debunk all of the myth that we hear about McDonald's and understand and be proud of actually the standards that the UK McDonald's were adopting: being the biggest organic milk purchaser, only serving free range eggs and understanding the relationships the the business had created with small and medium and big suppliers and those relationships spanning over 20 years making the supply chain a really quality and resilient one.

That's amazing and I'm sure that wasn't always easy. However, I think even with the best intentions, with companies, sometimes it's hard for those of us in sustainability roles to move the ESG story or narrative forward within the organisation. It can often involve really challenging or hard conversations. Can you maybe share some of those conversations that you have had to have over the years?

My work is all about difficult conversations, because it's all about creating change and no one really likes change. I'm a disruptor. Think about our personal changes: it could be ending a bad relationship or something small like changing an element in your diet or starting to exercise.

In my role, I'm asking people to change the way they do things (often behaviors) that they've done for many many years and never thought or wanted to do anything differently. I'm also asking people to do more with the same amount of resources either money or time and it can be frustrating for these individuals.

Sustainability requires innovation; things that perhaps have never been done before and there's a risk it can fail and nobody likes to fail or take risks or it's not our natural tendencies. The conversations that I've often had to have (and every role in every project have required difficult conversations) people are saying well let others do it first - let's not be the first, let's learn from others.

So my role is to make that change easy and to empower people either by giving them the choice or having them think that it's their idea or you know making the change happen via understanding their work priorities and aligning the idea and change to what they have to produce or perform on.

If I look back at some key projects, going back to Concordia University when I did my campus plan, one of the recommendations was to put solar on the new upcoming Engineering Building. We met with the architect and he was really against it. He was saying that solar had not been proven in Quebec with the temperatures ranging to, you know, going to minus many degrees and I was in that meeting with Geneva who was heading the project. It was my first conflict conversation and I was a student at the time and and proposing you know the the solar panels and the the conversation was well it's being done in the in Europe and it's being done in countries that have you know similar temperatures as Quebec and it is possible and let's let's take that risk because this is what we need to be doing. In that case, it wasn't successful: he didn't want to take the chance on solar. However, through the conversation and through other recommendations, we adopted different measures. So, for example, Concordia used Interface carpets as a result of that conversation. Also, we used low carbon cement using fly ash cement and so what was a difficult conversation (because you kind of want all of your recommendations to be adopted) led to a conversation of what's possible and where can we start and and we definitely got there in some instances.

And then if I think about again, moving to another university, McEwen had announced a LEED certification. At the time when the building was announced, it was going to be a LEED certification of excellence. And yet when the project started to be developed it was found that it was going to take a million dollars more to implement some of the measures that the building had announced it was going to be. And so again a really difficult conversation where we're not going to meet the standard that we've publicly announced and you know in a sense the university stance was well who's going to know you know we're going to be a level less than excellence, and and that's going to be a good enough and what are we going to compromise? And again it's this difficult conversation of saying well actually we've announced it publicly our funding is linked to to this standard and it's something that will need to be reported if we don't reach that target. Almost in a lightly threatening way saying it's going to come out and you know a million dollars we can find it in different efficiencies elsewhere and let's put our brains together to make it happen. And they did! So what was kind of going to be a maybe became a reality which was great in terms of having that conversation and using a little bit of force in making that change happen. 

Then moving on to when I went to the London School of Economics here in the UK, we were doing a project called “Bin the Bin” which is about removing individual desk bins and replacing them with communal recycling bins. The pilot started overnight in one department. We removed the bins overnight with the help of the cleaners and the benefit there was that,instead of having all these waste bins and plastic bags, we would remove them and these central recycling bins had food waste, mixed recycling, and had the central place of waste sorting. The morning that we started, everybody got a little pamphlet explaining the project and had received information prior to the change happening. But we received emails that morning from professors saying that this was an attack on human rights and that they demanded their bins back and that we had no right to remove it from their office and it was their property. So going to that departmental meeting was extremely difficult and people were upset with their things being touched and being taken. What transpired and because it was a pilot and we had done it only in one department, was that the strategy to implement the rest of the campus completely changed afterwards. What we did in subsequent implementation was go to a departmental meeting to explain the project and give a choice where occupants could either keep their bins but they would not get a plastic bag and it would not be emptied by the cleaners or donate their bin and they would be going to organisations in need. We did a little video for each of the departments where we said okay this is your chance to donate your bin and at first people were kind of not sure but once the first person brought it to the central place and then all these different bins kind of collated and then we took this picture that each department was empowered by that change. 

Coming into McDonald's, one of the things that I was really passionate about was reusable cups. When I first started, my manager (the director of supply chain) said don't waste your time on reusable cups, the business is not ready and it's just not a reality. I was even told don't don't compromise your reputation by even talking about reusable cups. I don't do very well when people say not to do something, so I went ahead and talked about reusable cups. The answer was, as I planned, “it's not possible, we serve our customers in less than 60 seconds (or whatever target it is). We have a standard of quality in our kitchen so imagine taking a dirty cup back to the kitchen where everything is sanitized and bringing it back to the customers”. Logistically, operationally, financially, it really didn't add up. And I stayed over 3 years at at McDonald's and I, through the years, implemented different projects like the paper straws and different plastic reduction measures and in the packaging and different measures.

But that one, from day one, I kept on talking about it. And it took those 3 years of conversations and actually thinking okay we’re the biggest fast food business, how can we make this possible? How can we empower the people in operations and IT come together in finding a solution? In the end, what transpired was a reuse program that was based on reusable cups that were already in the business and that was through a deposit system. So how it would work is you order your coffee with whatever the cost is for the reusable part of your cup. Then a reusable cup gets deployed at the kitchen, so a clean cup gets used. There's a ticket system that identifies the cup to know which one it is and then gives it to the customer. Now when the customer gives it back, it's to a central depot area, so again in the restaurant area, where you deposit back your cup and then get your refund. So that is now being trialled within the McDonald's restaurants here in the UK. So it it took 3 years of difficult conversations, people saying it's not possible and standing ground of well we need to make this happen, we need to find a solution and then finding solutions, working together, and empowering everybody in that process to do so.

That's incredible and it must have felt amazing to at least see the pilot start to be rolled out and to be able to see what works, what’s not working and then kind of continue to iterate from there. 

Yeah, I think seeing change being trialled and failing (for example the type of stickers that were too sticky so they they were hard to to clean, all the way to what's the deposit amount that's the right one to apply, all of the way to the type of cup that we're going to use and what the reusable cup would be made out from a supplier that was UK-based and using recycled recycled paper cups to make plastic reusable cups and really doing it well through our our IT system so that it's it's seamless and everything is thought of in terms of customer journey. It's everything that happens behind the scenes that people don't necessarily see: they might get frustrated from their initial experience and it is in fact their feedback that then fuels the reiteration and improvement of that solution.

That's such an exciting project. You mentioned at the top of the call that you're currently working in real estate. Are you working on any specific project in particular that you're really excited about? 

Right now, for us, there's a black hole and this is a reality for a lot of landlords that have buildings and have tenants. And that black hole is in terms of the building's energy consumption. So, if you think about the different buildings, we have supermarkets, hotels, warehouses, and we own the building but then we rent out for 20-30 year leases to various businesses. So, in some cases, we might have landlord consumption data and that's the case with offices where you might have communal spaces or external parking that's controlled by the landlord. But most of the consumption, 99% of the consumption, is through the tenants and the different spaces that they occupy. And, right now, there's no legal obligation for tenants to share that data. And so when I started in the role, one of the very first things before I could even draft a Net Zero plan or look at where we can impact is understanding our baseline.

And this black hole is that kind of big project that I'm working on. There's different ways to go about collecting data and we're piloting this measure that gets the data directly from the grid but we need tenant consent which is the biggest challenge. Even large companies with public Net Zero targets are coming back and declining to give consent citing corporate policy confidentiality. So it's really one conversation at a time with them to understand our objective and also the benefit that they're going to gain from giving us the consent because we're also going to make their consumption available through a portal which means that, when we first get the baseline and then do initiatives to reduce the consumption, be it solar energy, efficient LEDs or any other measures, they can then track in real-time what that consumption is producing so these business cases of of energy reduction measures then become easy to track. We make sure that we're doing it efficiently and with transparency so I'm excited because it's kind of the baseline that we need to do to start anything, be it Net Zero or energy reduction. There are different risks on different levels in terms of acquiring this data, but, once we have it, it's going to be gold. 

The next project that I'm excited about is that we're piloting an AI system that is a hardware that tracks the building management system. So building management systems are basically a centralized hardware that controls when your energy goes on/off, when you're heating or cooling, etc. It's looks at all of your building and manages energy throughout. Right now, this hardware that we're piloting is tracking for a two month period. How the BMS, building management system, is operating and then looking at how it can optimize. For example, if the weather is going to be hotter the next day or cooler, the building might change and create efficiencies. So this whole AI technology is is all about no capex required and no behavior change. It's really working to make the whole building operate more efficiently and, if it's successful, we're estimating a 10 to 30% reduction. So we're in that pilot stage using three of our buildings and will be reporting by the end of January how the pilot energy consumption has been changed by the measures. Again, it's something that we're trialling and we're working with the startup company and really excited to see if technology can really create that kind of energy reduction and help us in our Net Zero journey.

Lastly, I think the biggest potential right now is solar. It's a win-win, especially with energy prices fueling the business case. You know, just 2 years ago, you would have a 12-year plus payback for solar. And now you're looking at seven or eight. We're, as a landlord, offering to pay for the capital investment and then the tenants purchase the energy which is 30 to 50% more cost effective per kwh. But again, there's difficult conversations in that, because you're utilizing roof space and you're having legal conversations around what happens if there's (although solar is great for roof protection) roof damage, who pays for it and what happens during that time where you're not producing energy. And so those difficult conversations are happening on legal status and reaching agreements where you need to create confidence and create a kind of win-win situation where a no-brainer of “we need to be doing this and need to be doing it as soon as possible”. Again, this involves difficult conversations on the supply chain side because now it's working with suppliers and asking where are you producing, where is your silicon coming from, how are you auditing your supply chain, and what kind of standards do you have in place to to avoid human rights violations, which is a big issue within the solar industry. So these are all things that are happening behind the scenes before any projects can be deployed.

You mentioned having obviously done the transition from working in the North American market to working in Europe. What are the biggest differences (even some of the parallels that you see) in terms of our approach to sustainability and ESG in those two very distinct markets?

Back in Canada, when I was doing sustainability, I was using the heart as a way to motivate. That might work for your future generation - doing the right thing for our planet and people and obviously linking the business case was also a driver in terms of finding financial incentives. And those remain valid for both the UK and Canada.

But the main difference that I saw with working in the UK was in terms of legislation. The legislation driving the change here in the UK includes TCFD (the Task Force for Climate and Financial Disclosure). Starting in April 2023, large businesses will need to report on a carbon footprint with their financial disclosure and there's a different set of recommendations for those businesses. The plan is to start with large businesses, but the whole economy will be impacted by this, so companies can no longer hide behind commitments on Net Zero or carbon reductions. This will now be linked to their audited financial disclosures. What that means for landlords is that, again, in this year in April 2023, any building that is below an “e” level of performance - so we have ABCDEFG - so anything that is f&g you will not be allowed to gain income from those properties. There's a white paper by the government with the idea that, by 2030, the same will apply for up to B level. So by 2030, if your buildings are not a minimum of B you will not be able to generate income and Rental income from those properties. So this is a huge incentive in terms of getting our buildings and having the landlord responsible for improving the efficiency and getting the right certificate to be able to rent the asset. Finally, The Climate Act that the UK has adopted, 2050 Net Zero Target, means that businesses will need to also be Net Zero by 2050 or sooner. For us as a real estate business, what that means is the potential threat for assets becoming stranded and what I mean by that is there's a cost to get to Net Zero for a building to reach climate targets. 

Right now, when you're buying or selling a building, the energy efficiency is not quantified in the value of the building. But what we're now anticipating with this Climate Act is this transitional risk where buildings will have a “brown discount”, this kind of decrease in value if the investment required is larger than the asset value itself. So what that means is we need to work on retrofitting our buildings and future-proofing them so that the value is maintained across time. We're holding assets for long periods of time, and we're seeing how the energy efficiency is now starting to be included in purchasing decision making. That's only going to be fueled as time progresses, where companies realize this risk of devaluation of assets if the building is not performing as as it should be. Because then the investment for the person buying it will be too high where they'll need to make that investment. 

To me, the legislation in London is another planning requirement is now. Certification is so that you can't build a new building if you're not BREEAM. What that means is (and some people might say it's a tick box exercise) it really does make you look at your energy efficiency, your biodiversity, your waste management, your transportation, your impact on the community. Going through the BREEAM process just transforms the way you're developing buildings and is also an opportunity to look at your impact and review opportunities that you might have missed: for example realizing you're in a drought area or a flood area and implementing a Blue Roof that captures rainwater. Those conversations are happening and those opportunities are being explored fully and generating innovation and transformation. 

There's also now an operational carbon tax, so every building has to go through an analysis of it's carbon footprint at design and pay a tax equivalent to 90 pounds per per ton which is huge. So this is driving efficiencies because instead of paying a million pound in carbon tax to the council, well you're going to put that into energy efficiency measures and improve the building value to improve its performance. It's kind of a win-win all around so these these legislative and financial requirements are driving how we build and manage our our assets.

That's amazing to see all of that going on and certainly inspiring for this side of the pond. I know sometimes, especially for those of us working in sustainability, we're so bombarded with the reality of what is happening with the planet right now and the climate crisis and I'm curious if you have any resources to keep yourself motivated and inspired and engaged throughout this processes? Are there any resources that you would recommend to listeners to check out? 

I'm linked to different sustainability networks and it's great. On LinkedIn, these different groups that that pop up and, it could be energy efficiency or it can be community building, or different parts of the E or the S or the G. Getting these these examples of best practice and and business doing some some really cool stuff, I found Edie is great resource for compiling these examples and breakthroughs in business and sustainability.

But I also find my motivation from knowing the status of the world and where we really are at, and not kind of being blindsided by these greenwashing claims that can sometimes deter you from really realizing that the urgency of where we're at.

A podcast that I really love is “Radical Optimism”. I think it's important to keep the fire alive, of the urgency but also link to the solution. So the idea of being an optimist is that we can do this but we need to be radical and motivated towards change.

I’ll have to check those out! In having all of these different conversations over the years what are you seeing as one of the biggest barriers to change for businesses? And then is there something in particular like a tool or a resource or even just an approach that seems to be helping businesses overcome that barrier? 

Every sector has different issues. I think for real estate, what I'm seeing is this idea of embodied carbon. Embodied carbon means the carbon that is required for the production, manufacturing, transportation of materials. So when I'm building a new building or if I'm doing a retrofit, the materials and products that go into the building are currently not being quantified or reported on. So we can look at new buildings and say great it uses solar, it uses a ground source heat pump, it has all these kinds of operational technologies to reduce carbon. But when you look at what goes into building the building itself, again it is a black hole. Usually 90% of your carbon or even more because it's such a large amount: it's everything that goes into it, from the cement, to the metal, all the way to the furniture to the furnishings. Everything. 

When you're looking at changing or getting that information, like what makes this couch better in terms of carbon versus this other couch, or this cement versus this alternative, building material is often not being quantified by these businesses. They need to be doing life cycle analysis to get the carbon impact.

I was talking to a university here that is developing this alternative cement and their biggest challenge is that, to be to be deemed acceptable in building standards, you have to have have tested and approved that material because you don't want to have disasters where you know people's lives are are at stake. So if you're testing a new type of cement and the foundations aren't strong and people die, that's the worst case scenario that you can think of. So usually you'll need a 20 plus year testing, but we don't have that time. 

So how can you incentivize testing out new technologies and new materials in a safe manner? And that requires insurers, government policy makers, developers, everybody kind of getting together and sharing the burden (ie okay well let's start on a one-story building and let's start with infrastructure that doesn't require a strong foundation). We need to be thinking differently about how we can start introducing these new technologies and the funding and and consent to move forward with that because you know we need to do things differently and it needs to happen quite rapidly. We don't have the 20-year spend to wait to see if it works or not. 

The other thing that I'm seeing as ways businesses are tackling this embodied carbon is setting their own carbon budgets and allocating this shadow price, and making that shadow price part of their project performance and delivery. So each area of the business or project will be allocated a carbon budget and that becomes a way to measure, track and collaborate on initiatives and innovation. So that that is really kind of a good success story because, unless you're measuring it, you don't know where you're at and you don't know how much impact you can make. Having budgets associated drives performance and people want to make economies and so if you're on a project and you have a certain carbon budget and if you go over that you'll have to deduct. Then that is an incentive to to really think differently and do projects differently, so you might decide to reuse a part of your building where perhaps you might not have or you might go into reuse solutions and which sometimes require more time and more coordination but allow you to meet your carbon and financial budget. I think it's those difficult conversations we were talking about and and empowering that change that makes a difference.

You have spent the last 20 years now working in sustainability on the ESG side. What would you recommend to someone who wants to start implementing, whether it is the E, the S or the G, within their organization? If they just want to get started, what would you recommend that they do?

A first step is to understand your carbon footprint. And that might sound hard like where to start? But there's loads of free resources available to businesses. So that would mean understanding your energy consumption, your waste, your water, but mostly what you'll find is that's only a small percentage of your carbon footprint. 

Where the businesses footprint is often in their supply chain: what are you buying, if you look at your p&l (your purchase and loss) and your capital goods (what are you buying), what are the different categories of items (services or parts). Basically what are the elements of your supply chain. And then try to tackle that top 20% of your supply chain, and seeing what kind of criteria, what kind of tracking, and how can you influence your supply chain. Because then they come into your whole life product and then because once you've understood your largest carbon footprint, you can create carbon reduction.

I would also recommend looking at science-based carbon reduction (SBTi). There's a cost to be approved by the SBTi, but their tools are free on the web, so you can download their Excel spreadsheet, put in your data and see the reduction pathway you need to follow. And then you can go ahead and create a plan based on where your biggest impact lies.

Then, how you create that impact is through the engagement of your staff. That might be through linking bonus and promotion, so having direct ESG performance measures that drive the bonus and promotion is what will create a culture change.

Lastly, I would say to promote your successes but mostly your failures. If we start talking about the things that work and don't work then everybody can benefit and we can get there faster.

We always ask the same last question: what do you think it will take for businesses and leaders to be resilient going forward? 

Businesses build their business cultures based on transparency, innovation and collaboration. These are nice words, but if you reward these values and practices then they get embedded in your company culture. So, if you're rewarding people that fail and try to do things differently or if you're able to communicate when your project has achieved or not achieve its objective, and when you're able to create win-win situations where collaboration thrives,then that builds resiliency.

And then, finally, I think in terms of what we talked about initially: understanding the climate impact of the supply chain, what will climate change have as an impact on your supply chain and being prepared and building solutions and networks to protect it. So, if your supply chain requires people to come to work, and transportation is a big issue, or if you need a specific material part of your supply chain or whatever it's looking at being prepared with the worst climate change scenario. Assuming right now our planet is 1.2 degrees warmer, we're trying to get to 1.5 and that's the target with the Paris Agreement. But what happens, what are the impacts of climate change on your supply chain if we reach 1.5 (which is a best case scenario)? And what happens to your supply chain at two degrees? Three degrees? Four degrees, which is a catastrophe. Businesses that will have Plan B, C, or D and have to be ready with those solutions or networks will be the ones that thrive and survive. 

You're such an inspiration Chantal in terms of your career trajectory over the past two decades, so thank you so much for joining us today.

Thank you, so good to be part of it.