ESG Matters transcript: What can climate change learn from the Fairtrade Foundation?

Transcript

Anna-Marie:
Welcome. I'm Anna-Marie Slot, Ashurst's global sustainability partner, and this is our latest bonus episode on ESG Matters @ Ashurst. I'm very pleased to be joined today by Harriet Lamb, CEO of Ashden Climate Solutions Charity, and Roger McCurley founder of the Environmental Business Network. This is our first in-person podcast recording, so very exciting for all of us. And today, we're really going to learn from Harriet and Roger on the successes Harriet has had with the Fairtrade Foundation, what we can learn from that for climate, and then also insights, particularly from Roger on how SMEs figure into this solution. So thank you both for joining me today, I really appreciate it. Maybe we could start with just a few minutes of description on your backgrounds and how you've come to be here today.

Harriet Lamb:
Well, what a treat to be here in-person, as you say, Anna-Marie, that's such a joy. And as you say, I work at Ashden, we're a charity focused on finding often those companies or initiatives that are finding new and innovative ways to contribute to tackling climate change. And we want to really amplify those positive solutions. So it was really great talking to Roger about exactly the same issue, really, how can smaller medium-sized enterprises be in the forefront of the journey to net zero?

Yeah, superb to be here. It's really exciting. Yeah. So I set The Environmental Business Network up and we launched here at Ashurst where we are, on a wet, windy November evening in 2019, and then COVID came along. So we had to rethink our plans, but we're back again with that. And the EBN is a platform, basically, to bring all types of business together that believe that good environmental behavior should run through the DNA of every organization. And our membership splits into three groups. One is those who are professionals within environmental roles in large, privates, and corporates. And we have people who supply them in their supply chain.

Roger McKerlie:
But what we're finding, what we're really excited about, is that the interest we've had from, how we describe it, just as the general business market, and particularly the SME space who are waking up, but are not woken yet, to the whole notion of climate change and what their role is within them. So we liken it to say, we're very much a business organization. And we say that the climate crisis is the back clause to our stage. But to take the analogy ridiculous lengths further, the play that we act out is about what is the impact of and the role for business within that whole space.

Harriet Lamb:
I think what's one immediate similarity with Fairtrade was that, that was exactly about collaboration. No one can be a lone hero battling on these issues of justice or tackling climate change. It's exactly about businesses coming together, sharing best practice, and helping create a movement that takes everyone forward.

Anna-Marie:
Yeah. And that's an excellent point, Harriet, and really what I'd love for you to expand on because you led the Fairtrade movement in the UK, which is one of Britain's most active grassroots movements. So as businesses become aware of this, and as this becomes an issue around climate change and climate restoration, what can you share from those learnings at that level?

Harriet Lamb:
Well, when we started Fairtrade many, many years ago, honestly, everyone laughed at us. They said, "You'll never make it work. It will never succeed." And today, 90% of the public know about Fairtrade. There are thousands of products, it's reaching one and a half million farmers and workers. And I think key to that success was actually those companies that were ready to take a risk early on, if you like. So actually the first, I don't know if you know which was the first product to carry the Fairtrade mark, but it was actually Green and Blacks their Maya Gold chocolate, which Sam made in the kitchen with his wife. They were the ultimate SME. And now, of course, it's an enormous, highly successful global brand. And what they found and what all companies found, actually, was the more you committed to fair trade, the greater the gain you got. So when you offered fair-traders one of the options among your thousands of products, it tended to get lost. When you make Fairtrade absolutely central to the way you did business, that's when you saw the real gains.

So I can give you an example would be actually Tate & Lyle, a very big company, of course, but just down the river here. And because of trade regulations, changing Tate & Lyle thought it would be clever to find a way for all their range to become fair trade. And that is such a huge statement to go to that kind of scale, and therefore, they got the benefits at scale. Their employees were thrilled and were really proud of their company. They were especially proud because for the first time ever, they were getting lovely on the customer line. They were getting lots of compliments. They said, normally they got complaints, people moan, they got a stone in their sugar, they were angry. Instead of which, they had customers saying, "Yay, I can't believe Tate & Lyle have done this brave move. I'm now going to become your more loyal customer."

So it worked for the customers. That means, of course, it works financially. It worked in their supply chain with other customers who use their sugar, the big chocolate brands, for example. So it worked financially, it worked for their customers, it worked for their employees. So it was a really positive, virtuous circle, if you like. And I think that's where we need to get to with moving to net zero as well.

Anna-Marie:
Yeah. No, fascinating parallels, especially with the points around supply chain and how it fits into that wider picture. And I think companies who are really thinking about this properly are thinking about their entire sustainability from end to end. Roger, obviously, when people talk about this, the first thing people think is costs, "It's going to cost me more. I have to do all of this work. I don't even know where to start." Why do you think SMEs in particular should be putting in place net zero action plans when this cost seems so big and their individual impact maybe seem a little bit smaller?

Roger McKerlie:
Yeah. Great question. I think the first and obvious answer is to help reverse climate change. And let's not hide from that as well. There is an existential threat that needs to be addressed. But from a business point of view, I think the first thing is the fear is out there, the systemic change. And that is a term I hear used a lot, the only way to fix this is through systemic change. Implicitly people think, "Well, it's going to cost an absolute fortune." And, of course, as everybody's coming out of the COVID crisis and businesses are trying to survive, it is difficult to get CEOs and boards of businesses to focus on anything other than survival and the bottom line. But the costs don't have to be disproportionate. I think not everything is going to necessarily cost more money.

People who know more than I do would easily have the equation that tells us how the move to electric vehicles in the next three years is a no-brainer and actually will save you money. So there are issues around, it doesn't have to necessarily be just cost. I think a lot of it actually is about behaviors and culture within an organization and getting people to think differently. And, again, that doesn't necessarily have to cost, it's something just about an attitude change. And 10 small actions from every SME is going to have a huge impact. But commercially, and Harriet said it with Green and Black's, it's who are the early adopters? And I think there is a real opportunity over, what period, I don't know, three to five, I think maximum three to five years maximum, where SMEs particularly or larger private organizations that really embrace transformation to a net zero culture.

And there's a lot of steps on that way. It doesn't have to be as dramatic as it sounds, does it? Day one, I think they're going to get the chance to significantly build brand equity. Their ability to recruit the next generation, not to say that everybody is bought into that, but there's evidence that the next generation of recruits will be more committed than their parents. And some states... So that's kind of, if you like, an offense approach as to why they should do it, because they can get on the front foot. Defensively, scope three is going to impact everybody at some stage. And they're going to face up to situations where their suppliers are making big demands of them and they need to be able to address them. So there's this kind of existential offensive from a marketing point of view and defensive from a business point of view.

Anna-Marie:
Yeah. Excellent points. So I guess, Harriet, can we pull out one other thing just from your particular background in the Fairtrade movement and it's focused on fairness, it's in the title. In particular, when people talk about climate change and they talk about the race to net zero, there is this kind of question in the back also about the just transition, right? So why do you think maybe that those two should stay linked? Why is that crucial to the business community and what can the more forward-looking, those early adopters do to help support the connection between those two?

Harriet Lamb:
Yeah, I think that's absolutely right. Many people are worried, will they lose their job as society transitions to a zero carbon economy and society? So it's absolutely vital that we address those fears head-on because otherwise, well, firstly, those people might lose out and we can't face a situation where more people are going to lose jobs, particularly coming out of COVID. I live in the Northeast of England and there are communities there that were decimated when we closed the coal mines and they still are. So we cannot have a transition that is not just this time. We have to do it in a way that benefits the people at the bottom of society, the poorest people, and that they see a benefit, that they see, "Oh, if we tackle climate change, there are actually jobs and skills and opportunities for me in that."

And that matters because we need to address inequality in society as much as we need to address climate change. And it matters because that makes sure we get the public mandate. We don't want to end up like empower is brought to a standstill by the [inaudible 00:10:52] who were in the streets saying, "While you're worrying about the end of the world, I'm worrying about the end of the week." So we have to address people's concerns and it has to be a fair transition. In doing that, I absolutely think there are amazing opportunities for smaller medium-sized companies that come out of the traps first and fast, if you like. Just to take one example, we know we need to install thousands of heat pumps. We've got to replace all our gas boilers and we've got to move to heat pumps. There is a gaping gap in the market.

There are simply not enough people who know how to install heat pumps. Same story on retrofitting or improving homes. We know we only have 2% of the retrofit coordinators that we need. We only have a tiny fraction of the people trained in how to do those retrofits. Those are amazing opportunities. Another opportunity is, we know we're going to switch to having all our goods delivered by, for example, electric bicycles, instead of vans driving around our cities. So there's an opportunity. And we know, for example, e-cargobikes who got in early, they got a contract with the co-op, they're finding out new ways of delivering food in the local community, which also brings benefits because it's your friendly driver of your pedal bicycle who you know, who lives nearby. So I think there are fantastic opportunities out there for new companies or for companies to switch into these new sectors, as well as opportunities for companies to look at all their operations and think, "Well, how can I be one of the leaders in what I do now?"

Maybe they can't do retrofit or electric bikes, but every company needs to and can look and think, "Well, how can I be one of those early adopters that then delights investors, delights my customers, builds really loyal employees, and actually can help save me money or make money in the long run by being there first?"

Anna-Marie:
Yeah, no, definitely. And that mindset shift, that thinking about what you do as a company, not in your product, but in your delivery, right, which has got huge opportunities, big companies that have shifted from oil and gas into energy, right? "I'm an energy company," or, "I'm a logistics company and it doesn't matter if I'm delivering X or Y, I'm looking at the bigger picture."

Harriet Lamb:
Absolutely. I can give you two examples there. One is DONG which is Danish Oil and Natural Gas, the clue is in the name, had switched to being almost 99% renewable. They're now called Orsted. Wow, you kind of think, "If they can do it, anyone can do it." But I can give you another really good example. I don't know about you two, if you're clumsy with your cups of coffee, but there was a carpet company. I don't know if you know this example, Interface. And what they felt really bad was that clumsy clots were throwing their coffee and the company was redoing the entire carpet of the office, even though, actually, the mess was quite small. So then they came up with the idea of having floor tiles.

So if you do throw your coffee to the floor, you don't have to replace the whole carpet. You only have to put the little tile in. Well, it was a really good idea for reducing our use of the world's resources. It was a fantastic business breakthrough for them. They became an absolute leading company in floor tiles for carpeting offices. So they did the right thing for the environment and it turned out to be really good for their business. So I kind of think it's about all of us applying our minds to think, "Where are those solutions?"

Anna-Marie:
Excellent. And, Roger, any thoughts from you? Where do you think the business community needs to focus? I think we've got some great ideas from Harriet, but [inaudible 00:14:38].

Roger McKerlie:
Yeah. First and foremost, I think there needs to be a mindset shift. I talk to an awful lot of businesses, large and small corporates right down to very small SMEs, and one of the things that concerns me is I don't think there is enough awareness of the challenge and the need, and therefore, the opportunities because that's going to come last after you've addressed, "Wow, what's going on here?" So I think that there needs to be a big education program. And that's sort of what we're trying to do is to say, "Just come and talk to each other and learn." But I would say a mindset shift is important, and is particularly as we come outside of the COVID recovery and, hopefully, we'll see that happen. Corporates and large privates, I think the first thing is they got to put a plan in place.

Edie, did a survey recently, last week I think, that said 45% of UK businesses haven't got a plan in place. Now, okay, whether the numbers were big enough, I don't know. But when you drill down, that's 45% of the businesses. The people they asked all had internal employed carbon energy, environmental sustainability professionals. So this was 45%, unless I've misinterpreted, of those that actually have people who are paid to do this job. So that's a bit of a worry really, when you think that the rest of the market, mostly, haven't got people who are paid to do this type of job. So I think the first thing that corporates and large private organizations got to do is get a plan in place and a significant number haven't started. Then I think it's really critical that they help their supply chain.

As scope three becomes a reality, there are going to be organizations out there who are going to be like rabbits in the headlights, who are going to be told, "Change is coming down your track. You've got to do something differently. You have to account for your own carbon footprint." And the government have done the hub recently and we worked with a great chemical energize and people are out there to help, but it's bewildering. So the corporates need to help their supply chain. From an SME point of view, it's about learning and becoming aware. They've got to get onto this. They cannot pretend it's not happening. I was with a business the other day who just steadfastly refused, said, "Oh, it's all nonsense." So then I took them through a few things they could do from their business point of view and go back to what you said, Harriet, that it's not all about the big stuff. It's about learn what's within your world and change that.

And I took them through some things, I said, "Well, if you change this and you do that, this is a good brand positioning for you to be in." Oh, their attitude changed completely then. Now it was only because I was there in front of them to be able to say that to them. So I think the SMEs have got to get with it, basically, and start learning they can't hide from this. And from that, they will see the opportunities that come on. My kind of one-off advice would be, is for every business to investigate and research the circular economy, because the need to transition to net zero is complicated.

The terminology we've just bandied around here, to most business, what on earth does ESG mean? And what is scope one, two, and three. And why is it called scope in the first place? And what is net zero as opposed to carbon offsetting? And for people who are in the know and talk the language, like any business language, there is a business language come around the whole sustainability piece, people outside of it, it might as well be like learning a new language. So if they look at the circular economy, I think that is a metaphor for what is needed to happen. It's a great place to start and to understand how a marketplace in an economy can change its systemic behavior without potentially everything going completely pear-shaped for them.

Harriet Lamb:
Well, it's really interesting if you think of something like eBay is a very early example of the circular economy, but still, it sort of felt quite niche until really recently, it's got this huge head of steam behind it, hasn't it? And I don't know if you saw Ikea launched a buy back scheme. You can take your furniture back to Ikea and they will make sure they reuse it. So I think things are going to move faster perhaps than we might imagine. And of course, ultimately, there is a legislative commitment in this country. We have to reach net zero by 2050. So we're going to have to do it. I suppose our concern is always that 2050's too late. And I'm completely with Roger, really, we needed to be starting yesterday.

So it's starting with those small, positive steps that everyone can take that actually help break it down. We do a lot of work with schools actually. And I think it's the same thing, you think, "Well, if schools can do it, certainly companies can." But it's the same thing there, you start by having meat-free Monday and then you move to meat-free Wednesday as well. Or you start by encouraging walking or cycling to school one week in the year, and then you move to a month, and then gradually, gradually we can help make those wider behavior changes that you were mentioning, Roger.

Roger McKerlie:
Well, that's right. I'm not a culture change specialist, but anybody who is, will say, "You can't just walk into an organization on Monday and say, 'Everything you knew on Friday is different.'" So it is baby steps. And a bit that was interesting going back to that research that came out, of those organizations that 52, 3% said they had a plan in place. I was a little bit worried by that because it said that they plan to have their scope one and two programs done by 2040.

Harriet Lamb:
Oh, good gracious.

Roger McKerlie:
[crosstalk 00:20:29] with them saying scope three will be 20, 40 to 50. Now, I think there needs a little bit further investigation on that, but we can't wait. If you're an SME sitting and you read that, you think, "Oh, I've got plenty... I'll have retired. My kids, and whoever else will have taken over the business, not my problem." It has to happen now, and it has to be about mindset shifts. And the final kind of view we have is, "Let's look for the carrot rather than the stick." Because we've all been through a tough 18 months and businesses are trying to recover. So the existential threat is very evident and people can look into that as much, or as little as they dare, but to change, businesses need to see where the incentive is.

And we need to say to them, "Yes, there is bad stuff on the horizon, and it's getting a little closer by the way, but if you change your behaviors now, there are opportunities to succeed commercially." I spoke to somebody today actually who was quite sensitive about that, who said, "Oh, I'm glad you said that because..." This guy runs a business and he said that he wanted to talk to his employees about commercial opportunity that comes with a more sustainable policy. And he was terrified to use the words, "commercial opportunities," to the next generation of younger people in case they hurled rotten tomatoes at him for getting it wrong. And I think that might be the case, but there is a reality, business needs to be able to win in the short term.

Harriet Lamb:
But also, going back to the lessons of Fairtrade, that was exactly the lesson of Fairtrade, that you have to have fun. You have to make it an engaging and positive experience to be part of sustainability shifts. Now, obviously, and Fairtrade is very lucky, we had delicious chocolate and wine and coffee and all kind of goodies to entice people in. But I think in the same way, it's looking at what are the positives that come out of the shifts to sustainability and making it feel upbeat is absolutely critical to helping win people over and fee-... No one wants to feel they've got to give up lots of things. Everybody wants to feel, "Oh, if I improve my home, I'll have a cozy, warm home and lower fuel bills. Oh, if we all walk and cycle more, we'll have cleaner air and we can hear the birds and fewer children will get asthma." These are the real positive things that I think we can bring out

Anna-Marie:
And we might be able to work off those COVID kilos that might've attracted to our frames-

Harriet Lamb:
Oh, me too.

Anna-Marie:
... in the intervening few months.

Roger McKerlie:
Maybe.

Anna-Marie:
Look, thank you both. This has been brilliant. I wish we could go on for much longer. But key takeaways, I think, for people, don't, especially in SMEs, don't be afraid if you don't know the answer, nobody knows the answer. This is a fast-moving brand new way to look at things. And there's huge opportunities if you change your mindset and really approach it in a way of looking for where you can really maximize your success as a business. So thank you both so much, really appreciate your time today.

Roger McKerlie:
Thank you. It's been great.

Harriet Lamb:
Thank you very much.

Roger McKerlie:
Thanks for having us.

Anna-Marie:
Thank you for listening to our latest bonus episode. If you'd like to hear more about what Harriet is up to, please see www.ashden.org.uk. And similarly for Roger, please visit theebn.co.uk. To learn more about the issues we've just covered, please visit ashurst.com/podcasts. This special bonus episode is just one small part of our continuing podcast series, ESG Matters @ Ashurst. Make sure you don't miss any of our future episodes by subscribing via Apple Podcasts, Spotify, or wherever you listen to your podcasts. While you're there, please also listen to any of our other episodes and leave a rating and review. In the meantime, thanks again for listening and goodbye for now.