Month: January 2014

JOHN SHEGERIAN: Welcome back to Green is Good. We’re so honored to have today Scott Sergeant. He’s the Director of Houlihan Lokey’s Industrial Group. He’s also a friend of mine. Welcome to Green is Good, Scott Sergeant. SCOTT SERGEANT: Thanks a lot, John. I really appreciate you having me on the show today. I’d love to tell my story about the world that I’ve dedicated, which is investment baking in the environmental resources space. JOHN SHEGERIAN: Well, that’s great because we haven’t covered that space as much, but before we even get into investment banking and environment, can you share a little bit about the Scott Sergeant story and the journey leading up here? How did you even get to this position and how did you end up at Houlihan Lokey in this unique and leadership position? SCOTT SERGEANT: Yeah, sure. I’d be happy to talk about that. Basically, I’ve been with Houlihan Lokey for about 12 years now. Houlihan Lokey is an international investment bank that is a full service in terms of advisory services, client mergers and acquisitions, markets, financial restructuring, evaluation services to our clients around the world. We’ve got 900 employees and we cover a whole variety of different industries in those services. Over the years, I was just an investment banker spending all my time executing transactions. M&A and raising capital for middle market clients and a few years ago, my personal and professional life collided and what I mean by that is that I all of a sudden when I decided to really spend my time in a particular area, I wanted to focus my banking career on something that truly mattered to me and it was something that I had a passion for. I’ve always loved the outdoors. I grew up on the Jersey Shore watching all the regulation through the ’80s to really clean up the waterways and was always exposed to that and that was something I had a passion for and now that I have children, and hopefully grandchildren one day, I’m caring, increasingly so, about the environment that they’re growing up in and so as an investment banker, I was fortunate enough to get exposed to a variety of very cool companies that provide services that really address some of these environmental problems, companies that recycle soil for beneficial reuse, collect and recycle, use more of the oil that comes out of your car when you have to do an oil change, companies that have big roles in terms of cleaning up the BP oil spill, things like that, companies that are really making a difference so I was fortunate enough to work with companies like that and as I said, my personal passions kind of collided with that experience and I a few years ago, decided to spend my entire career in banking just focused on working with companies like that because I personally, as a finance guy, am not personally changing the world like these companies are but I get to be exposed to these companies on a regular basis and help them raise the capital or look for owners for their businesses to help them do what they really want to accomplish. JOHN SHEGERIAN: So, you are then the Director in charge of the Environmental and Industrial Services Group, so you’ve mentioned some of those different sub sectors, Scott. Talk a little bit about environmental services. What does that really mean, for our listeners out there, in terms of the categories that you cover and the businesses that you cover? SCOTT SERGEANT: Sure, yeah, so the way I define environmental services, first of all, it’s a huge market. Depending upon how you define it, in the U.S. alone, it’s a $200-billion-a-year kind of business and it’s very fragmented so it covers a lot of different kinds of companies but the services that the companies that I work with, what they do is they really help other companies focus on sustainability, safety, just keeping them environmentally compliant, energy efficiencies, these are the things that these companies are helping just regular industrial commercial consumer product companies focus on. Another way to define it is that if you just think of any waste stream. If it’s the garbage that you put out at the curb, your recyclables, contaminated soils, waste water, air pollution, whatever it is, these are all different forms of waste streams that are produced by our society, there are so many services that touch those waste streams when they move from offstream where they’re generate to downstream where they ultimately have to be eliminated or put into some sort of final resting place, if you will, and so upstream, those waste products have to be tested, engineered, or analyzed. These are professional services, Downstream, those waste products are recycled, treated, incinerated, or ultimately landfilled, less so and we can touch on that a little bit but then in between at various points these waste streams are being touched in many different ways. They’re being cleaned, remediated, collected, transported, and stored and now there’s a big trend that a lot of these waste streams are finding their way into a closed loop system so there is now final resting place. You’re continuously recycling the same product over and over again for continued use, whether it’s plastics or metals, or something as unique as used motor oil. I’ve done some transactions in that particular sector. JOHN SHEGERIAN: If you’re just joining us now, we’re with Scott Sergeant. He’s the Director of Houlihan Lokey’s Industrial Group. If you want to follow along like I am right now, I’m on my iPad while visiting with Scott here and I’m on his great website, www.HL.com. Scott, talk a little bit about what you’ve seen now. You’ve been at Houlihan Lokey for 12 years. You’re in the middle of a very interesting and important segment of the business in the investment banking world, Is there a lot of interest in investing in the environmental services sector right now? SCOTT SERGEANT: The short answer is, absolutely. There is a lot of corporate M&A activity so there are large businesses that are acquiring smaller businesses and even large companies. Private equity is an enormous pool of capital that needs to be put to work over the near term. These are institutions that have to spend billions of dollars in private enterprises and they are increasingly trying to build investment pieces in this particular sector and just put their money to work and again, there’s just billions of dollars in that pool of capital alone. Venture capital has always been an interesting sector in a variety of different areas like green tech and some other emerging or fast growing opportunities and I spend a lot of time with both large companies and private equity funds, like helping them think about places where they can build businesses, where to expand, where there’s consolidation opportunities and aside from doing and executing transactions for clients, that’s where I spend a lot of time, helping people think about where to build their businesses in this particular sector but a lot of activity. We closed four different transactions in the month of August alone, which is on a monthly basis but certainly I think it’s an indication of activity in the sector. We represent a company called Peri Renewal, which is a non hazardous liquid waste business and our client sold their business to Darling International, which is a large publicly traded food rendering and food service recycling waste recycling company. We helped restructure and sell a company called Synagro Technologies, which helps recycle the solids that are separated from waste water treatment plants that is then sold to a European infrastructure fund called EQT, which is an interesting transaction. We also, in the month of August, sold a waste to energy facility down in South New Jersey to Covanta Energy, which is the largest waste to energy business in the United States. Then we helped a company called Santech Waste, which is a municipal solid waste landfill company to recapitalize their business so it all kind of touches on a variety of different areas if you go back to definition of environmental services, John, it touches on a variety of those different pockets. JOHN SHEGERIAN: Really, as opposed to how the media portrays the investment banking world today, you’re an investment banker who’s actually doing good. You’re doing well for of course, your firm and for yourself, which is part of the wonderful capitalistic world and society that we live in, especially here in our democracy in the United States, but you’re also doing well by getting the right support, as you so say, in terms of raising capital or creating alliances and collaborations for the brands that you represent so they can do more of the important and great work that they do to help fix our great environment and the world that we live in. SCOTT SERGEANT: You said it very well, John. That’s what gets me really excited about going to work every day because I get to work with companies that are really making a difference and bring value to them in the form of capital and helping them partner with the right groups to help them grow and become stronger businesses. JOHN SHEGERIAN: Let’s talk a little bit about trends. What are some of the hot trends that you see right now? What’s hot and what’s not with regards to environmental services that you’re seeing? Because you’ve got great visibility on this. SCOTT SERGEANT: There are a bunch of different trends. I think they make it very interesting place for people to put money. There are a couple of themes that everyone talks about and hears about. I think worth mentioning sustainability and landfill avoidance. Those are two good examples and they’re big terms and big words that people maybe even over use a little bit but they are not trends anymore. They’re very real and talking about sustainability for a second, most if not all Fortune 500 companies today have just massed this sustainability initiative and now even have a chief sustainability officer working in their company. It’s good PR. It’s good for brand imaging but they’re also proving to be economical in cost saving initiatives. Landfill avoidance, you see it everywhere right now. You have so many alternative outlets to put your waste. It was just taking the traditional glass, paper, and aluminum out of your trashcan and now you’ve got avenues to take your food and compost, John. You’re helping facilitate this huge universe of electronic waste and there’s a whole variety of other specialty waste streams where there are ways to dispose of it, not put it in a landfill and that leads into another theme that I really like, which is just creating value from waste streams so there are some of the large integrative waste companies, like Waste Management, they don’t call waste, ‘waste’. They call it ‘alternative materials’ because they know that they’re controlling this valuable product. I even heard one CEO, one executive in passing saying everything can be recycled except asbestos. If you think about it, there’s maybe a cost to recycling certain things more than others but at the end of the day, you can find an outlet for almost anything out there. JOHN SHEGERIAN: That’s so interesting. For our listeners out there that are investing, just picking stocks and things of that such, what are some of the bigger pitfalls for investors that you would highlight or you’d like to highlight for people to be careful of while they’re looking at their opportunities out there in terms of placing their own capital? SCOTT SERGEANT: Sure, so a couple things: Growth is always probably the biggest growth driver in every instance. It ultimately drives, whether you put a big multiple or a small multiple on a business and I think the one thing you’d want to be careful about is what kind of tailwinds the business has to grow it so we just talked about landfill avoidance initiatives. In some areas the waste streams that are being generate are being generated are not the fastest growing markets. In conjunction with landfill avoidance, there’s just no raw focus on reducing or minimizing the use of certain waste streams or raw materials used to manufacture so you just want to focus on truly what is driving the business, the growth of the business. One other thing that we come across sometimes is the exposure to commodity prices so a lot of the value that we just talked about comes out of these waste streams or commodities like it could be tied to oil prices or metals or some other commodity so you just want to understand sort of what the exposure is that the company has to those that are really sort of outside of the control of the service that you’re providing so the companies that really differentiate themselves are ones that are creating an essential service where you’re getting paid to provide something that is essential to the ongoing business that just thrives. JOHN SHEGERIAN: Got it. You’re in New York City, and you travel a lot and things of that such. What do you see in terms of cross-border activity in the environmental services sector? SCOTT SERGEANT: That’s a good question. You know, we’ve seen across the industrial world that I’m a member of at Houlihan, and we’re the most active industrial advisor in terms of M&A. We see just a tremendous amount of cross border activity and we’ve transacted a large percentage of our deals with Asian and European, even South American businesses buying U.S.-based companies. Specifically within environmental services, surprisingly we’re starting to see a lot more of that and what I think it interesting is if you pick the world apart, there are different countries and continents who are at various stages of evolution in terms of progression towards focus on environmental issues. Europe, for instance, is in many respects, way ahead of where the United States is and so Europeans kind of view the U.S. as almost an emerging market in some ways so putting aside the issues that a lot of European countries are having right now, I think you’ll see an increased focus as they come out of recession, on looking at investing in the U.S. On the flip side, if you look at countries in Asia and South America, like China and Brazil, they are way behind the U.S., and now they are actually looking at U.S. businesses’ services, technology companies, so that they can adopt the best practices that we have here, maybe make an investment, bring home some of those technologies or learn best practices by owning businesses here and then bring them back to their home countries. JOHN SHEGERIAN: Interesting. How about pending regulation? Is that one of the major forces of velocity supporting the companies and pushing the companies forward that you are investing in or you are finding investors for? SCOTT SERGEANT: Regulation is a big trend that we’re always focused on for all the businesses that we deal with. Regulation is a very good thing for the businesses that operate in the sector because it protects them. It’s a real driver for why these companies exist and why they need to exist and you have the comfort that regulation is continuously increasing and it’s kind of an irreversible trend if you just look over the decades since the 60s when all the regulation started, You can just kind of pile on decade after decade more regulations, which are good for all these companies. That said, you want to be careful not to rely on regulation because often it’s very hard to predict when the EPA or federal or state agencies are going to really enforce new regulation. You know that it will happen but it’s a matter of when so you want to be careful not to truly bet on certain new regulation but you can rely on the fact that it’s only going to get stricter over time and what exists today is not going away and there are a number of big themes out there that I think could be really game changing for a number of industries. As you know, John, e-waste is one area of it’s just a matter of when that becomes a national more federally regulated industry. The fracking rules deal with the wastewater around the oil and gas sector. That’s a huge area where regulation varies state to state in terms of what you can do with that waste water and there’s other pending regulation around air pollution, waste water, other waste products like coal ash, what to do with all that and whether that can go into traditional landfills or specialty landfills so there’s a lot of things that the EPA is working on and there will be definitely some big regulation in the near future. JOHN SHEGERIAN: We’re down to the last minute-and-a-half or so, but you get an interesting visibility into so many great companies in this country because of where you sit at Houlihan Lokey and some are in your sector, in industrial or environmental services, and some are not. They’re just other companies. Do you see, given your unique spot that you sit, green and sustainability as a competitive advantage for the companies that you represent in environmental services and industrials? SCOTT SERGEANT: Yeah, across the board, if you provide a sustainable solution or green solution, I think all else being equal, it is a competitive advantage and what I mean by that is so long as it’s not a more expensive or if you’re not providing more expensive or significantly more expensive service, all else being equal, consumers and industrial businesses will choose the more sustainable green option so yes, it does become a big competitive advantage for these businesses. JOHN SHEGERIAN: For our listeners out there in the last couple of seconds here that want to be the next Scott Sergeant, we’ve got a lot of young listeners across the United States and across the world that want grow up and change the world like you get to change the world. Any last pearls of wisdom for them as they embark on college or grad school? SCOTT SHEGERIAN: Sure. There are so many emerging opportunities out there. We work with a lot of mature businesses but we work with a lot of emerging businesses and there are so many really interesting companies that are continuously being developed and new business models out there so I guess, for the younger listeners, I would just look for some of these opportunities because I think those companies will become bigger and bigger and more relevant over time. JOHN SHEGERIAN: Scott Sergeant, thank you so much. For those who want to learn more about Scott and what Houlihan Lokey is doing, it’s www.hl.com. Scott Sergeant, you’re a great sustainability leader, a good friend, and truly living proof that green is good.

JOHN SHEGERIAN: Welcome to another edition of Green is Good, and we’re so honored today to have Adam Hall with us. He’s the Chairman and Founding Steward of the Earthkeeper Alliance. Welcome to Green is Good, Adam Hall. ADAM HALL: It’s great to be here with you, John, and all your listeners today. JOHN SHEGERIAN: Well Adam, you’ve got a fascinating journey and story to share. Before we get into talking about this wonderful organization you’ve created, Earthkeeper Alliance, can you share the Adam Hall journey and what brought you to this point to start with? ADAM HALL: John, it’s been quite a wild ride and I keep thinking often about how much fun I had as a kid and probably many of you had a good time as a kid and my mom only had one rule and that rule was when the sun went down, just be home for dinner, Adam, so the rest of the day from sun up to sundown, I just was riding my bike and hiking in the mountains and connecting with nature and I was growing up in Pasadena. We lived in the foothills and had a lot of fun and then all of a sudden, I grew up a little bit and moved out to the beach in Malibu and adopted a new law and this one was a little different because I wanted to achieve what became known to me at the time, The American dream, to succeed in life so I adopted this rule, John, of the jungle, which is whether you’re a lion or a gazelle, when the sun comes up in the morning, you better run like hell so I begin running fast and furious to make sure I wasn’t going to be eaten and so that really drove me towards a more of a predatory capitalist lifestyle but the results were hey, I achieved that American dream. I married my junior high and high school sweetheart and we have three amazing daughters together. I’m even a grandfather now. It’s hard to believe, and then the successful real estate development business and the golf clubs and the whole nine yards but when I got there, something was missing and not only was I unhappy, but I realized wait a second, there must be so much more to life and that’s when the quest began to connect myself with my inner and outer environment, not just be dangling in the wind out there chasing the almighty dollar. JOHN SHEGERIAN: That’s interesting; so then talk a little bit about the epiphany and the sea change within you to go do more and to go do different. ADAM HALL: Well, that’s well said, more and different, and really essentially at the moment, that sea change began when I was driving down the Pacific Coast Highway in Malibu going to work. Of course, the sun was coming up and I was on a phone call with an investment banker on Wall Street closing a very large loan transaction for one of my real estate deals and in a moment when the banker said to me, John, ‘Well, we have a problem here with your loan,’ and I just exploded with just anger and frustration. A lot of us have these frustrations with the Wall Street types but this one was particularly unique and then this dog ran in front of my car and I ended up having to scream, slam on the brakes, and reach for the tums, and I realized this wasn’t the life I wanted to live and I really set out on a quest out into the world, out into the nature, out into the wild, to get kind of answers that I was seeking, which I think are a lot of answers people ask, who am I, how can I serve, how my gifts can be applied, and ultimately, out in the world, the wild, so if I found preservation of myself and the power of nature to really help save myself and also to connect me into the greater capacity and the greater good of this great Earth we’re on. JOHN SHEGERIAN: For our listeners out there who just joined, we’ve got Adam Hall on and if you want to see the great work he’s doing, please go to www.earthkeeperalliance.com or EarthKeeperMovement.org. You were in the woods. You then created this organization and you also wrote a book, The Earthkeeper: Undeveloping the Future. Can you explain both the creation of this great organization and also the genesis for writing the book and how has it gone since you’ve created the organization and written the book? ADAM HALL: Well, sure. The best point to kind of connect with that is it’s like what do we do when we realize our greater calling and how do we become of greater service and more purposeful in our life? And those were the questions that I was asking and those were the answers that I received as I went into the jungles of South America or into the mountains or into temples and whatnot around the globe to connect with fabulous beautiful places on this planet, not only that were symbols of great mythology or great wisdom, but represented the beauty of nature and the power of nature and when that time came to be back really into effectuating change in the world and showing up in the world, it was how can I take 20 something odd years of real estate experience but do something with it in a way that could really effectuate a greater good? And that’s when I adopted that triple bottom line of it’s not just profit. It’s also about people and planet and if we can be purposeful in that, that’s like the quadruple bottom line; purpose, people, planet, and profit. If we put those four things together, then something could effectuate greater results and greater change so I ended up coming up to up here in the central coast of California and acquiring a coastal ranch and began to steward that and began to recreate the biodiversity there, effectuate conservation easements and preservation programs for the land, and then that resulted in less of a development, less intensity that could ever happen on the property. I began a permaculture garden and hence, that was the birth of the Earthkeeper Alliance and out of that grew the book that I just published called Earthkeeper: Undeveloping the Future so our message is really about undeveloping our future, not developing our future so we’ve been out doing a couple projects around the country to undevelop the land JOHN SHEGERIAN: That’s so interesting so can you give a little glimpse of what does that really mean, undeveloping the land, and then also, go back and share with our listeners the core mission of the Earthkeeper Alliance? ADAM HALL: Yeah well, the core mission of the Alliance is to take wild spaces, large tracts of land that are slated for development. In other words, they have entitlement and development rights. They may build homes there or golf courses or hotels and these type of intensive development and scale back the development right to a more compatible level, to a level that meets the demand of the community but also doesn’t become overbearing on the land so we undevelop the entitlement. Instead of developing projects, we scale it back and conserve it in perpetuity and that’s really the mission and that’s what we’ve been up to around the country. JOHN SHEGERIAN: Can you talk a little bit about what you mean by the terms that you’ve created, ‘impact investing’ and as you just well mentioned, the quadruple bottom line of profits, people, planet, and peace? ADAM HALL: Yes, absolutely. Impact investing is a very exciting arena because it offers an alternative to traditional investing and traditional investing is purely profit motivated and what impact investing is doing is really saying we’re going to invest in your water company or we’re going to invest in this environmental project or we’re going to invest in poverty but we’re going to invest in a way that has the greatest impact, not just to generate dollars back to us, but how does that affect the community? How does it affect people on the ground where that investment takes place? So it looks at is it creating jobs? Is it helping with abject poverty, for example. Then it will also look at what kind of impact would that have on the land? What kind of imprint is it really leaving? Is it creating more carbon and pollution or is it really creating more greener and more sustainable type of technologies? So those kinds of things are taken into consideration when we look at impact investing as compared to just looking solely at profits and it’s a very purposeful type of investment strategy and I’m pleased to share with you, John, and all your listeners, that this is really an exploding space and there’s a lot of capital flowing into this space. Matter of fact, JP Morgan came out with a study recently that said over a half-a-billion dollars is flowing into impact investing so there’s good things happening around our investment world as well. JOHN SHEGERIAN: Adam, so what you’re really saying if I’m hearing you correctly is that as a recovering capitalist, which sounds like what you really are, and that’s okay, there’s no shame in that, you can really merge in the sustainability and the green world the goal of making money but also doing good for the planet and the earth as well? ADAM HALL: Yes. You can, and as a matter of fact, I became a B Corp, which is a Benefit Corp, this last year, John. I’m also a member of One Percent for the Planet and essentially, the idea of B Corporations, and they’re becoming very popular in most states. Soon and hopefully soon, they’ll be available in every state but that allows companies to have as part of their government provisions to do things that are about things other than the environment and it actually is a dictate of the corporate mission to do things that will benefit people and planet so we’re seeing more of that and the fact of the matter is that at the end of the day, there’s greater good and greater value in companies that actually employee this type of quadruple bottom line because their greatest assets, it’s always been said, are their people bring value to that, not just a one line sentence, and their greater assets are also in the land or in the places they operate their business and to not effectuate more pollution or use more sustainable efficient type of technologies in their businesses so there’s ways to look at this and put this together where it’s becoming very powerful and making a difference and we’re starting to see it, so I’m excited to share that news. JOHN SHEGERIAN: Adam, do you feel hopeful from where you sit today and the journey that you’re on throughout the earth in the future of the earth and the sustainability of the planet that we all get to enjoy? ADAM HALL: I do very much so, and it’s a little bit different, I think, that what the main mantra is out there. Obviously a lot of folks are fairly pessimistic about it and there’s a lot of reasons and data and science of reasons that do make for a lot of concern and it shouldn’t be that we should not address these issues but my optimism comes from what I refer to as the internal flame because the total environment is both the outer and the inner environment so as long as we are consciously aware of how we are affecting the planet and how we are engaging and in relationship with the planet, then things will be fine because that will be a guiding force, so to speak, so I believe that the more each of us connects with our own environment and the connectivity with the nature as a whole, that we will be perfectly fine. We have a lot of challenges in front of us but it’s very much within our hands to have this greater relationship and to also engage in technology but technology is really not the end all here. It’s really about our relationship with the environment and choosing to bring forth consciousness around that to our legislators and then to our actions that we take in our homes and in our communities. JOHN SHEGERIAN: We’re down to the last three minutes, but I want you to go back to what you just mentioned, Adam, technology and some of the other more current issues that have been floating around, genetically modified food products and organisms. Can you share what that means for us right now, technology and how that relates with the future of the planet? ADAM HALL: Well, it certainly is a double-edged coin. As you mentioned, genetically modified organisms are coming forth in a bigger and better way, not just in food. For example, we recently were involved in a project that they were doing genetically modified trees. Imagine that and trees, this is what creates our nitrogen, oxygen, the air we breathe. They’re also involved with pollinations with pollinators and certain pest and it has the effect of killing off all of this and so there are some pretty radical things that are happening in the genetically modified organism arena and those are the kinds of things that we must effectuate an immediate in to and ostensibly, we have greater projectivity and greater harvest and some things are coming up around having the whole weather pattern changing and effectuating crop production and having seeds and things that address this so over time, they become ineffective again as well so I’m deeply concerned about technology from a genetically modified perspective and believe that it ultimately is going to have a substantial effect that will infringe upon the vitality of humanity. Technology in general though, John, is really effectuating great things because it’s allowing us to look at modeling. It’s allowing us to look at climate change. It’s allowing us to have great metrics. It’s allowing us to come up with real time data where we can act effectively in a way that conserves the planet better so technology has a good side and a bad side and I don’t like those words too much but it is that double edged sword and we can do so much with it as it relates to creating sustainable types of technology around power and renewables and other things like that so it’s exciting. JOHN SHEGERIAN: We’re down to a minute-and-a-half. Human innovation and technology, give us a little glimpse into what you’ve seen that’s coming in the next decade or two, Adam. ADAM HALL: Well, the exciting thing, first of all, is the ability of human beings really to be more adaptive to their environment so just on a personal level, on an innovative level, we have the ability to be very innovative about what we buy and how we consume things and so first and foremost, I see that there’s a level of consciousness that’s happening. I think in terms of other types of technology, we have technology coming that I think could be a game changer around hydrogen and looking at cleaner-fueled and weaning off the carbon-based economy. It doesn’t appear that way with what’s happening with fracking but there’s really some fantastic things that are going to be happening. We’re going to see more hydrogen type of cars and much cleaner energy in so many different ways so we have things happening along those lines. I think this renewables energy space, that technology will continue to improve and the cost of that will continue to decline so we things that are happening that we can capture the natural power of the universe, whether it’s through the sun or through wind and through other types of renewables, so technology is really helping us dramatically in those ways but there’ll be some other things, I think, that will be the real game changers but it all begins with ourselves. How would we innovate ourselves to adapt to a more sustainable lifestyle and a way that we can live our lives and it often begins with simplicity and beings with ourselves so I always begin there. JOHN SHEGERIAN: That’s awesome, and for our listeners out there, please buy Adam’s great book, The Earthkeeper: Undeveloping the Future, wherever books are sold, Amazon.com, Barnes and Noble. Support Adam and all the great work he’s doing and learn more about how you can be part of the solution. Also, go to EarthkeepAlliance.com or EarthkeepMovement.org. Adam Hall, you’re a passionate and inspiring sustainability leader and truly living proof that green is good.

JOHN SHEGERIAN: Welcome back to Green is Good, and we’re going to Detroit, USA, right now. We’re bringing on Carrie Majeske from the great and worldwide iconic brand, Ford. Welcome to Green is Good, Carrie. CARRIE MAJESKE: Thank you very much. It’s great to be here. JOHN SHEGERIAN: It’s great to have you. You’re the Manager of Sustainable and Safety Engineering, Carrie. How did you ever become the Manager of Sustainable and Safety Engineering at this amazing brand, Ford? Tell us a little bit about the journey. Did you grow up from a little girl dreaming to become a sustainability and safety manager? CARRIE MAJESKE: I wish I could say that I did. I don’t think I could’ve plotted this path if I had to and I’m very old so I told you this is a pretty long story. JOHN SHEGERIAN: Let me hear it. I want to hear it and I want our listeners to hear it because there’s so many other young ladies across the world that listen to this show and truly, this is about inspiration and education so I want them to hear your journey. CARRIE MAJESKE: Great. Well, I started as an engineering student. I graduated from the University of Michigan in 1984. That’ll give you an idea of my age and at that point, I don’t honestly know if we had defined the term sustainability and I came into the company knowing that I wasn’t going to do nuts and bolts engineering forever but I knew I needed that experience so I went into suspension design. I did my early engineering work in trucks, products development, working on suspensions for trucks and that sort of segued into I went from very specific to pretty much more general as I went over time so I moved into more program management, business strategy, regulatory plans. At one point, I had a really cool job. It was The Women’s Marketing and Product Office where we were trying to figure out tools and processes for people to think about the vehicle from a woman’s perspective. Can you get in and out of a car without chipping your nails? Can you get in and out of a truck with a tighter skirt on? We were basically trying to help the product involved and engineer designer vehicles so that women would want to buy them because we knew at that point and we still know that women influence about 80% of the vehicle purchasing so anyway, that was a really cool job. I also spent some time in Battery Electric Vehicle as a Chief Engineer and that was in the ’90s, when it wasn’t quite ready, ’80s and ’90s, and a little bit of work in fuel cell engineering and those programs and the segue into this position was from a planning job where I was looking at future fuel economy, safety, and emissions regulations, and making sure that our incoming products had all the phases and all the very complex regulations so getting the right content into future programs and from there, I started working on what’s now our Global CO₂ Glide Pass and it aligned with stabilization at 450 bpm in the atmosphere, which is what climate scientist think is a reasonable level of CO₂ in the atmosphere to mitigate climate change and I was working with a group of people much smarter than I who had power train experience and fuels experience and modeling tools and we came up with what’s now our blueprint for sustainability and that’s when my boss said, ‘Okay, now you’ve been in the product development world. We’re trying to take sustainability to the next level and we want to integrate it into the company. It’s going from a public affairs thing and a reputational thing to driving the business,’ so he asked me to join this team and I have been working on product sustainability initiatives ever since. JOHN SHEGERIAN: That is awesome, and so that was back around 2007 where that all happened? CARRIE MAJESKE: Yeah, it was really kind of a critical turning point for the company and I was happy to be maintained as part of it so we’ve come a long way from there and at that point, not only did our product portfolio take hold but the business piece was given the right attention too and that’s, I think, why I’m here to talk to you today. We’ve hit our stride and all is going well. JOHN SHEGERIAN: Yeah, and for our listeners out there that want to follow along more than just listening to Carrie and what she’s doing over at Ford, you can go to two great websites. First, you can go to the core website, www.ford.com, but of course, on this issue and to learn more about sustainability and the sustainability journey that Ford is on, you can go to Media.Ford.com and there’s a great section on innovation and sustainability and all the great things that Carrie and her team are doing at the wonderful brand, Ford. Carrie, let’s get into it a little bit now and I’m on the website so I have the fun of being on the website and talking with you at the same time. Talk a little bit about one of your most iconic brands, the Ford F150 and what’s going on innovative right now with the F150 that you want to share with our listeners out there. CARRIE MAJESKE: That F150 has been a great product for many years, hundred of thousands of vehicles a year we sell, and what we’re talking about today is just the one small innovation that can have a much bigger difference in the long run, which is a wiring harness bracket that is rice held instead of petroleum in the plastic so we’ve taken something that was 100% petroleum-based and now infused a renewable resource that displaces some of that petroleum and so 10% of the material is rice hall, 25% is recycled polypropylene, and 65% is still virgin polypropylene but what this does when we do these kinds of things is just sort of pilot a new material, something that’s grown, not a scarce natural resource. Sometimes it can be cost effective. We wouldn’t do it if it wasn’t cost parity with the outgoing material. Sometimes these kinds of materials can offer weight safe so it’s a small part, little bit of renewable material, but when you multiply that by hundreds of thousands of vehicles, it makes a difference. JOHN SHEGERIAN: It does. When we start thinking about, I had never heard of that part before you ever brought that up but when you talk about little steps in the right direction that lead up to big changes, how many parts go into a car and how do you deconstruct a car from where you stand as the Manager of Sustainability and Safety Engineering and then decide which parts you think you have opportunities to change like you’ve changed this part? CARRIE MAJESKE: It’s kind of bottom up, top down. We don’t say, ‘I want to change that wiring harness bracket.’ Pretty much, from a sustainable materials side but we set aside the metals. Metals are recycling. We need them. We’re light weighting with different metals but we set aside the metals. We look mostly at the plastics and the non-metallic stuff and then our wonderful partners in the supply base are also important to this journey. They are the ones that bring these initiatives forward. By the time they bring them to us, they’ve done some of the early screening work and then we find the right application with the research folks, do the diligence with the research development because we’re not going to do anything that compromises the performance of these products and then once we know we have a product that performs in the business case, we go forward and generally if it’s something a little bit more innovative, we’ll start small and then migrate over time to more applications as we know we’ve got a good deal all the way around. JOHN SHEGERIAN: On the metals side, traditionally what metals go into a car? Because I’m a layman. I really don’t know this stuff. I just know my car key starts a car and I go but help me with what metals are traditionally the metals and how you evolve that to be lighter and stronger and create a more sustainable car or truck. CARRIE MAJESKE: It’s basically steel, cast iron, high-strength steel, aluminum, as we get more aggressive with weight, some magnesium, so a lot of different kinds of metals and we have big weight challenges because weight is really how you get to fuel efficiency and fuel efficiency is really the biggest environmental impact we can make so that’s our number one priority. Where light weighting is concerned, we’ve done some things that are really innovative in terms of downsizing and boosting our engines so you lightweight the vehicle so you can use a smaller engine so you can lightweight other parts of the vehicles so there’s sort of an iterative impact there and with the metals, we are obviously looking from a system and figuring out how can we use high strength steel aluminum more strategically to take big chunks of weight out of the vehicle that ‘ll then allow us to use smaller engines and get better fuel economy. JOHN SHEGERIAN: For our listeners that just joined us, we’ve got Carrie Majeske on. She’s the Manage of Sustainable and Safety Engineering at the great brand, Ford, and to follow along online like I am, you can go to Media.Ford.com. Carrie, what other environmental friendly materials are you developing and going to be featuring on Ford cars and trucks now and in the future that will make your vehicles more sustainable? CARRIE MAJESKE: One of our biggest successes, and a lot of people aren’t aware of , is soy-based seat foams. We were approached by the Soybean Board, which had an excess of soy, and they came to our research team and they said, ‘We really want to do something with soy.’ They found a way to displace petroleum in our seat foams and it took a lot of development, a lot of work to get it to perform right, to not have any odor, to not degrade over time and we now have about 10% soy-based foams in all of our cars and trucks we produce in North America. We also have 75% of our headrests have the same soy foam and then we’ve got a headliner, which is sort of the inside of the roof material, that also, on our Ford Escape that is featuring the soy foam so right now, from that applications of soy foam, we’re diverting about 5 million pounds of petroleum a year from the application of that foam and that reduces CO₂ emissions by about 20 million pounds annually so improving fuel economy reduces tailpipe emissions and the use of our vehicles but this is a way we can also have an impact on CO₂ emissions in the materials phase of the life cycle. JOHN SHEGERIAN: How long did it take for you to develop that and then after you’d proven success and this year you’re at 5 million pounds displacement, how does that grow over time in terms of the use of the product after you find success? CARRIE MAJESKE: Yeah well, I think that the plan is to continue to see how much more soy we can use and go from 10% to maybe 15, 20%, 25, I don’t know how far they’ll be able to push the limit but the idea is not really great how it passed the product lines and gotten all the volume we can and go higher in terms of% of the foam so there’s possibilities, nothing I really know of that’s specific right now to announce along those lines but the other thing, there’s more materials. We’re also experimenting with things like wheat straw, we’ve used as a plastic reinforcement in the cargo bin in the rear of the Flex vehicle and that one good news; it was a good application , performed well, couldn’t get quite to the cost that we needed so that one didn’t go forward so we’re not going to go ahead and do this sort of volume if it’s really not a good business case. We’re also using cellulose, which is sort of wood pulp, as a plastics reinforcer that’s about to be in a few of our products. There’s a couple different applications of coconut, grounding up the shell and using that as a plastic reinforcer. The hairy stuff on the outside of the coconut, for lack of a better word, has been used in a trunk liner application behind the carpet so a lot of these things aren’t visible because customers wouldn’t necessarily like the way they looked. They’re behind the scenes right now but there’s a lot of things in them and then there’s some other applications that we’re just kind of toying with right now. There’s some sustainable rubber from dandelions that’s potentially could be used if we get to the point where it’s ready. A fun one, we’re doing a lot of different recycled content to get us above the renewables and things you grow. We also have a recycled applications where they take retired U.S. currency, so you get stacks of dollar bills or $100 bills and otherwise, they would be incinerated or put into a landfill but linen has really good material properties so as a reinforcement in plastic, it has a potential and they’re looking for the first application of a coin tray, which would be kind of cute. JOHN SHEGERIAN: Wait a second. I want to step back here. This is one of the greatest brands in the world, Ford is, that you get to work with and so as opposed to some of the coolest brands that were developed in America of recent times or in the United States out of Silicon Valley, like a Apple iPhone, you’re really doing some really cool things at an industrial level behind the scenes there and, like you said, some of them are very invisible. Explain to our audience the cool things you’re doing that many of them never get to see both in finished product or even in process but how does that work? How do you inspire innovation at Ford internally but also externally with your vendors? CARRIE MAJESKE: Well, the internal answer, there’s a very talented team of research scientists in our labs who just their whole mission in life is to take stuff that would otherwise be wasted or grown and find applications that make sense in our products. That’s what they do and the love it and they’re very good at it and they’re very bright engineers and researchers but they also have an eye to the sustainability piece of it. As far as the supply base goes, everybody is looking for an edge and a hook. It’s a competitive industry, competitive to be in our supply chain, and we need innovators and so two suppliers come to us with the same part. One has renewable content and the other doesn’t and they’re the same performance, same class. You’ve got an edge if you’re the guy who brings us an innovative part and they want to do good too. I think people want to do good. That’s unique about Ford is I know the practitioners all over the company who are just out there doing their otherwise mundane jobs but also trying to do them to make the world a better place and that makes it exciting and it gives us so many innovations that have just happen with obviously, the support of the bigger company structure around it. JOHN SHEGERIAN: I’m on your site and I’m looking at this beautiful rectangle with one of your vehicles in it and it’s Blueprint for Sustainability 2012 and ’13 and around this vehicle, you have a lot of different arrows and it goes to vehicle safety, supply chain, people, water, climate change, and financial health. Why don’t you do an overview if you can, Carrie, and it’s on some of your favorite topics, as to what is Ford doing in some of these other areas? Because sustainability truly is holistic and it’s a journey. It’s not an all or nothing and it’s not a kill shot. We all know that so if you could just share some of the sustainability journey on some of those other topics, it would be wonderful for our listeners to hear some of the inspirational things you’re doing there in those areas. CARRIE MAJESKE: Okay. Well, and I’m looking at the same page so this is the electronic, if you will, cover of our latest sustainability report and I will do a plug. This is the 14th report that we’ve issued. The first ones we much different, very toe in the water, but over time, we’ve done a better job of being transparent about what we’re doing and how we’re doing it and where our challenges are and where our successes are and having some measurable accountability for what we’re doing so this is the summary. The reporting process starts with a materiality assessment, which basically says what’s the most important and what’s the biggest challenge and we need to be working on the most important that are the biggest challenges. The biggest challenges that don’t have any impact, that’ll take care of itself, so that’s what ends up in the report and climate change in the environment is probably the biggest thing here but everything on this page represents one of the materiality issues for us so just to give you the highlights, the climate change I mentioned. We have a Glide Pass around 450 ppm, which is the climate scientists accepted level of concentration of CO₂ in the atmosphere to limit the rise in temperature to two degrees so that Glide Pass is our fleet average CO₂ emissions of the tailpipe that we need to hit over the long haul. This number will go out to the year 2200 if we’re all around that long and we know kind of where we need to be and we are regularly calibrating our product plans to know that we have our fleet average declining at the rate that it needs to contribute to that climate strategy. Now, that’s our product. Obviously, we have operations that have energy and CO₂ emissions. We also are working on substantial improvements in emissions from our facilities and our operations, which by the way, generally when you reduce energy, that’s also a good business case, so a lot of the things that we’re doing tie into the business and the environment. Moving around the circle here, financial health is clear. If we’re not in business to do any good, we won’t do any good. We have to look at our financial health and profitably and we do report on that and I won’t bore you with the details because you’ll find them all over the Web. Vehicle safety is something we will never compromise. We are always pushing forward, not just meeting the regulations but looking at the customer safety features, things like inflatable rear seatbelts that were a recent innovation that nobody mandated that. It’s just a way to keep someone safe. Supply chain, we clearly can have impact in our own space but by virtue of the massive supply chain that we work with, we are trying to share the learnings on human rights, on energy and environment with our supply chain so that not only are we doing good things, but we are helping them to have the same standards and the same practices and we’re learning from them and they’re learning from us and we work very carefully with our supply chain to do that. People is obviously where this all starts and so we do have some reporting on who are people are and where they are and what we’re up to. I think we’ve got a pretty happy workforce. Probably there’s always room to improve there and I think you’ll see some more diligence and reporting on the people’s side in the report and then water is not new but clearly water scarcity and water quality are becoming more and more at the forefront and people around here have been saying we’ve been worried about climate change but that’ll take hundreds of years to get to us. Water won’t take that long if we really aren’t careful with it so we’re embarking on a corporate global water strategy that starts to look at how do we reduce water usage in our facilities and how do we consider it when we do things like alternative fuels and even in the manufacturing, what are we doing about water quality and water scarcity in the places where we operate? So, those are the highlights of the report. Like I said, you can mill around online forever and not read everything. It’s more than 500 pages of information and we use this as our inventory within the company as well as how we communicate all the good stuff to all our employees so we can be the ambassadors for all the good stuff, too. JOHN SHEGERIAN: You know, like you said, when it comes to water just as a highlight, I was just reading another fact online. You cut global water use 8.5% per vehicle. That adds up. CARRIE MAJESKE: It does. When you’re milling millions of vehicles a year, that can be a lot of water. JOHN SHEGERIAN: That adds up. We’re down to the last couple of minutes or so, and I want to sort of switch topics, Carrie. Of course, Ford is doing amazing things but I want to also talk about leadership and leadership as you and I are of the same generation and when we graduating college, it was a much different world as we know, not only with regards to sustainability, but for also leadership opportunities and here you are in 2013, a leader of a very important issue at a very big and important brand. When Ford makes a move in sustainability, the needle truly moves and here you are as a Manager of Sustainable and Safety Engineering and recently, we see this whole movement led by some of the new leaders on the west coast of the dotcom era, the Shaul Sambergs of the world and those folks of this whole lean in in women’s leadership. In the last couple minutes, can you share some thoughts? Because we have young people in the United States and actually also around the world because after we air on Sirius, we actually are uploaded on the iTunes network and we track our thousands and thousands of downloads around the world. There’s a lot of young women out there that want to become the next Carrie Majeske. CARRIE MAJESKE: That’s scary. JOHN SHEGERIAN: Seriously, but you broke through before it was okay or cool to break through. What pearls of wisdom can you now share backwards with the next generation on how to be a leader and how to effectuate change in whatever they want to do? CARRIE MAJESKE: Wow, you know, I’m a very simple person. I don’t consider myself overly bright. I’m bright but I like to keep things simple. I came into the company, as I mentioned, and I got a good solid academic background. Also, I didn’t mention it but I have an M.B.A. out of the University of Michigan as well, so education is important. You don’t have to know coming out of the chute what you want to do. I have kind of let it happen and I’ve never managed my career, I’ve always tried to do my job and wherever in the job I was, I’ve tried to understand how it fits into the bigger picture and maybe where it would take me but like I said, you do your job. I’ve always wanted to do things that I felt were important. I’ve always wanted to work for people that had integrity and cared about people so I keep it very simple. Do what you like to do. Ultimately, I believe everybody that will do what they like to do, it doesn’t matter where they are, they’re going to do what they like to do so find that place. Get a good education. Take care of the people around you, people that work for you, the people that you work for, and set your sights on just taking the next step. You don’t have to fix everything today. Just take the next step in the right direction. As far as sustainability goes, I’m just joining the Herb Advisory Board and the Herb is a program at the University of Michigan between the School of Natural Resources and the Ross Business School and that program is just amazing and it’s attracting people who have already done way more in their lives than I ever will and they’re young people who now want the education around it so there are some really cool programs like that in sustainability that can kickstart you but frankly, I’m not sure how we’re going to harness those people within a corporate framework as they come into our space and we do have some students coming in that are just amazing and they have the better education than I had and a head start but they also then have to be grounded in the business. If you work for a company or even a nonprofit, know your business and do the right thing. JOHN SHEGERIAN: Awesome, and thank you for your time today. Carrie Majeske, you are just really wonderful and thanks for spending time with us. For our listeners out there, go to media.ford.com. Carrie Majeske, you’re an inspiring sustainability leader and truly living proof that green is good. CARRIE MAJESKE: Thank you so much.