Dee Yang is a Partner in McKinsey’s New York office and co-leads Natural Capital and Nature. She focuses on the nexus of climate and financial institutions to unlock capital flow for climate solutions. She leads McKinsey’s global collaboration with the Mission Possible Partnership to establish decarbonization pathways for hard to abate sectors.
John Shegerian: Listen to the Impact Podcast on all your favorite podcast platforms, including Apple Podcasts, Google Podcasts, Amazon Music, iHeartRadio, Audible, Spotify, Stitcher, and of course, at Impact Podcast.com. This edition of The Impact Podcast is brought to you by ERI. ERI has a mission to protect people, the planet, and your privacy, and is the largest fully integrated IT and electronics asset disposition provider and cybersecurity-focused hardware destruction company in the United States and maybe even the world. For more information on how ERI can help your business properly dispose of outdated electronic hardware devices, please visit ERIDirect.com. This episode of the Impact Podcast is brought to you by Closed Loop Partners. Closed Loop Partners is a leading circular economy investor in the United States with an extensive network of Fortune 500 corporate investors, family offices, institutional investors, industry experts, and impact partners. Closed Loop Platform spans the arc of capital, from venture capital to private equity, bridging gaps and fostering synergies to scale the circular economy. To find Closed Loop Partners, please go to www.closedlooppartners.com.
John: Welcome to another edition of The Impact Podcast. I’m John Shegerian, and we’re so honored to have with us today, Dee Yang. She’s a partner at McKinsey and Company. She co-leads in Nature Capital and Nature Division of McKinsey. Welcome to the Impact Podcast, Dee.
Dee Yang: Oh, John, thank you for the warm welcome, and thank you for having me.
John: Listen, it’s always great to have another NYU alum on the show with me. Us NYUers have to stick together.
Dee: Oh, indeed.
John: Anyway, your colleague, Mark Patel was on recently, and he did such a wonderful job talking about all the great things you’re doing at McKinsey in this space. I’m so honored to have you on today to continue that discussion. But before we get talking about what you’re doing in Nature Capital and nature, and all the leads that you’re doing in sustainability as well, can you talk a little bit about the Dee Yang background story? Where’d you grow up and how’d you even get on this path or journey?
Dee: It’s actually quite funny. I think speaking at one of my clients’ events at Climate Week last year, I said, as a kid growing up in New York City, my first exposure to nature wasn’t really until my mid-20s that I was like, “What is all this outside of the concrete jungle?” I fell so much in love with it that most of the time if I’m not working, it is somewhere outdoors in a hammock, in a kayak, on a trail, on a mountain, something that just allows me to get outdoors and be rejuvenated by all of the greatness that the earth has. I grew up in the city. I went to high school down in Tribeca. I found my way into consulting in the midst of the last financial crisis where really there weren’t any jobs other than risk management, given most of what the banks had to do to correct the path. It was in search of work and advisory work with my clients that had social impact that ultimately led me into climate change, into sustainability. While my ex was going to grad school at Yale for the environmental management degree, I went to a bunch of lectures and events, and in one of the sessions that John Kerry hosted with Al Gore talking about the quintessential crises of our lifetime, like I got bit by the climate bug so hard that I was like, this is what I need to do for the rest of the next portion of my career.
I started my work at McKinsey, focused primarily on financial institutions, on All Things Climate, and then I led for a period of time McKinsey’s partnership with this coalition called The Mission Possible Partnership, looking to decarbonize hard-to-abate sectors. From there I said, “What is actually my theory of change and what do I believe would actually move the needle on the climate crisis?” The first one is, how do we get as much capital out the door as possible towards climate solutions? Wait a minute, where the heck is nature in all of this? Why don’t we talk about it as a solution set? Why don’t we talk about the twin crisis that we’re also facing and the degradation of our ecosystems? So I went around looking for people at McKinsey that did work on nature, and we formed the service line. There’s already a lot of great stuff in what we do on the conservation front, also with investors, but then we broadened it to what is the overall corporate agenda that we need to be shaping on what it means to be nature-positive as well.
John: Because there’s so much chatter out there now and some of the terminology has gotten politicized. I want you to help unravel some of the terminologies and define it for our listeners and viewers, therefore it will set the path for what you are specifically leading at McKinsey. Twenty years ago or so, when I started my recycling company, this was before there was an iPhone, this was before there was Al Gore’s Inconvenient Truth in 2000 six-ish. Sustainability in the US wasn’t a big thing. Circular economy discussions weren’t a big thing. The shift from the linear to circular economy. So where are we today when you take some of these acronyms and some of this terminology and frame it up for us? Sustainability, circular economy, ESG, Nature Capital, Nature Positive, how do they fit together, but how are they also separate pieces of this whole environmental ecosystem or pie, so to speak?
Dee: I think the foundation to most of this is the science that goes back to the earth system or the planetary boundaries, in that there is ultimately a budget to how much the earth and the planet can sustain us. When we talk about things like net zero, we’re looking at the carbon budget and what do we need to do in order to reduce our usage of the carbon budget. When we think about things like circular economy, I think it’s really around the idea of there are resources that we’re extracting. We make that into goods. Those wastes can ultimately be remade into input. So like how do we actually reduce the draw that we have on the natural resources, which we can think of as the balance sheet of the planet if we wanted to. Sustainability in the kind of early 2020s, was really focused on emissions net zero. But I think with the recognition that we needed to go beyond just caring for our carbon budget and this whole nature positive emerging on the scene, it’s really a solidification or formalization of the broader sustainability agenda that covers other parts of our resources that we rely on, the things that we source to make our products, where we make the products, what we do with the products ultimately, and how we treat it at the end of life. On top of all of this, I think ESG has just been a dimension primarily for investors to think through what is it that they’re financing and what’s the impact of those dollars. Then that’s made its way into corporate lingo as well in terms of [inaudible]
John: Right. So when we get to the terminology of Nature Capital, you are co-leading that at McKinsey. For our listeners and viewers to find Dee and her colleagues and all the great work they’re doing in sustainability, Nature Capital, ESG, and way beyond with regards to protecting and preserving our environment, please go to mckinsey.com. Dee, what does Nature Capital mean to your practice and to your clients and potential clients?
Dee: When we say the easier way to think about it is the balance sheet of the earth. It’s all of the things in which we draw on in terms of our natural systems. For example, water, for example, the critical minerals that we’re mining in order to actually support the transition, forestry products, the soil in which we’re cultivating the food that makes its way to our tables. All of this, and the ecosystems that support us to us is we think about in terms of natural capital and the depletion of these things are rapid, and that also includes biodiversity too,
John: Right. So I’m a client of McKinsey, and I think I’m doing a good job on my path to net zero. Am I now going to be having discussions with you or are you going to be having discussions with me as a client of McKinsey to talk about getting my company more nature-positive?
Dee: Well, those conversations are already starting, and it’s not only the consultants or the advisories that are coming to the corporates with these kinds of questions. Investors are also starting to ask these kinds of questions. Probably the entry point for many is where is there overlap between nature and climate that is very explicit today. So for example, the deforestation impact to climate change, which is something that investors are now asking questions about. How does your making of this product actually lead to deforestation, lead to deforesting virgin forest or old growth forest? Like what are the impacts that that has on the ecosystem? Because we ultimately know that that is contributing to a worsening of the physical climate. Another entry point that is very linked to climate is the question around watershed health and what is happening in terms of water stress. Because changing physical climate is actually impacting and worsening what is happening in terms of drought conditions. So if you’re exposed to those kinds of risks, your investors are likely already asking those kinds of questions of you today. If you take a nature-positive angle to the sustainability agenda and what you’re looking to do, you would be thinking of not only your corporate’s impact on emissions alone, you would be thinking about things like, how does my activities or my economic activities impact land use change? How am I reliant on water resources and how does my activities change the health of these ecosystems? So for example, if I am a beverage producer, how much water I’m actually pulling out of the watersheds, how am I actually replenishing these watersheds or reducing the need of these freshwaters over time?
John: Since you bring up water, I want to get your take on this as well. Obviously, Dee, as you did, I grew up in Queens, went to high school and college in Manhattan. Times were different when I was growing up, and we’re living through probably what is the hottest year ever recorded in world history right now. About 10 or 11 years ago, this show’s been going 16 years or so, I had the lead of water technologies on from GE numerous times, more than once, 4 or 5 times. What he made very clear to me back then is, we don’t have a water problem on this planet. “Where there are water problems or water stressors, it’s a political problem because the technologies exist to put us in the right position with regards to water.” For example, I now live in my headquarters of my companies in Fresno, California, literally the Ag Belt of the United States now, and one of the most controversial water stress locations in the whole country. California just seems, going back to the Chinatown era, has been fighting over water rights forever and a day, and we still can’t get it right. Is it truly a technology issue or a political issue, or a little bit of both, because the examples he gave back then, this is 10, 11 years ago, is that when Singapore Israel and parts of the United Emirates had water problems, they fixed it with basically black water facilities that were very socialized to the public at large, politics got aligned and they made it happen with the technology. Are we in that same position today or have things changed since then?
Dee: Let me think about this. We published back in December of last year, a report called Nature and the Balance, where we said, looking across earth system boundaries, where are we today in terms of hitting up against these boundaries? There’s actually a wonderful Netflix movie about this featuring the earth system boundaries and planetary boundaries of [inaudible] to watch it. Within that, we also looked at, what are the marginal abatement cost curves. Those were created for the carbon budgets earlier by McKinsey in 1997 and have been refreshed over time with the latest technology and estimates in terms of capital cost and downgraded or downscaled for different industries, in terms of what would it actually take to decarbonize certain industries. When we looked at fresh water consumption, and are there enough actions that could be taken collectively, and globally that brought us back in line within the planetary boundaries or within our safe operating space, we said, yes, there is enough opportunities or initiatives that we could do that would get us back to the safe operating space.
Whether or not there will be sufficient collective action, or political will or economic returns in implementing some of these initiatives, I think that’s the part that is being debated. Some of those challenges come from, I think, political systems, but not all of them. I think there’s also a challenge in that we’ve continuously underpriced or undervalued natural resources on which we depend on because we believe that it’s replenishable and that they will always be there, but truly, I think we are likely overdrawing many of the natural resources that we depend on. If you take the kind of interconnection between freshwater consumption, watershed health, and the impact that might have on biodiversity loss, biodiversity is one of those places in which there isn’t enough initiatives that we can put in place to bring us back into the safe operating zone because we’re already past that. So I think it’s important to think about these challenges kind of in the system context or in the ecosystem context in terms of how they’re actually impacting or influencing each other.
John: Understood. We use this show all about impact and positivity, highlighting great people and great organizations like your part of Dee, but I want to ask about different sectors. Historically, what sectors are the largest contributors when you do the net positive analysis of natural capital depletion, and why are those sectors historically, the villains in this story, and how is your practice helping get those folks and those sectors in those industries back on the right path so we could create a better world for all of us?
Dee: I don’t know that I would use the term villain. I’ve had the pleasure of working with one of the agriculture sub-sectors, and we have this debate around what are the things that can be done on biodiversity. I think it has to be said in the context of also a growing planet, most more population that needs to be fed, needs to be sustained in terms of having access to affordable and nutritious food, right? So we’re solving for this in the context of a lot of other complexities that go beyond just what is the environmental outcome. I think it’s important to keep that in mind. So while they might be contributors to the state that we are in, I think it is not from a kind of villainous perspective of, I want to have this kind of negative impact on the environment versus I may not know, or I may not be held accountable or that might not be priced in. So when we looked at this economic activity and contributing or attributing those impact back to these economic activity by sector, where you see the largest contributor to exceeding the planetary boundaries with the impact to nature is predominantly in agriculture.
So both crop and livestock agriculture, largely because of how much water is required in order to produce some of the things that make its way to our dining tables, but also in terms of the land use change. So we have to clear land in order to grow crops, we have to clear land in order to host the livestock. That will have impact to both how much land is still virgin intact forests, how much are we actually protecting of key biodiversity areas. Then the inputs that we use in terms of fertilizer, chemicals, crop nutrition might have runoffs or pollutions that make its way into our water systems. If you think about algae blooms, a lot of this is due to over-fertilization, but when we did this exercise, and listeners can access the report on our website, what we did in order to simplify it was to say, where is the economic activity actually happening? But we don’t take into consideration that it’s not only like the farmer’s responsibility because we ultimately as consumers and also the grocers are making a choice of what is making its way into the stores, making its way onto our shelves. But then you can also argue, do the consumers have the choice to influence? So there’s a little bit of this, but from a sector perspective, we did the attribution specifically to the economic activities back to crop and livestock as the two major contributors to exceeding planetary boundaries.
John: How much is the convergence of what you are doing with regards to nature positivity and nature capital and this explosion of AI coming together to help you in your work in predictive analytics for your clients and potential clients that want to get on the right path to being more nature positive?
Dee: It’s wonderful all of the innovations that are happening in this space. I think one of them is a forward-looking view in terms of one, how could the physical conditions change around us in 5 years, 10 years, et cetera, under different types of heating scenarios or climate scenarios. I think having that to inform business decisions to say, where is supply chain disruptions going to come from? Where is it ultimately important to prioritize restoring biodiversity or restoring the health of these ecosystems, people can now make a much more informed decision with new data and new analytics coming online. The other thing is, there’s also a movement to start tracking what is your ultimate impact. So if you take the dress that I’m wearing, tracking the impact of creating this product based on where it was sourced or what materials were sourced to make my outfit, where it was made, where it was sold, et cetera.
That transparency across the supply chain and also down to the different ecosystems, I think is also informing decisions both within the procurement departments of major corporates, but also ultimately to consumers once this information actually makes its way onto the shelves. So that is also helping. The other thing is there is quite a bit of analytics that are coming online to support conservation. So in terms of what is the health of these ecosystems, what are the various biodiversity characteristics of these ecosystems, but also what are the socioeconomic characteristics of these environments or these locations? So if you were to preserve this land or shift it into a more sustainable production, what then happens to the various communities that might be dependent on this place in terms of having a livelihood? So those things are now being kind of taken into consideration to optimize where should we be thinking about conservation. Where should we be thinking about changing our practices?
John: Understood. Your practice primarily advises government or mostly corporations team.
Dee: At the moment, I actually serve a wide spectrum of different types of clients. I spend some time with startups that are trying to scale up, not natural climate solutions and nature-based solutions, that’s trying to think through how can we use natural systems in order to actually sequester carbon at a faster rate. I also work with nonprofits in terms of their conservation efforts, their work with local communities on the ground in terms of protecting the ecosystem and addressing the challenges that these communities have that pushes them to draw from the ecosystems. Then large corporates around what is the footprints of their products? How do they think about a nature-positive strategy? What does this mean comprehensively in terms of sustainability that has both emissions but also water in terms of sourcing, et cetera, institutional investors that are starting to implement or extend their climate risk analytics to cover nature analytics? They think through what kinds of scenarios should I be putting in place in terms of forecasting valuation of my investees?
How do I think about the regulations that are starting to come online and how these could impact future market conditions? I also serve a number of global banks as they think about the expansion of their climate risk programs to cover nature as well as investors on starting funds that focus on nature-specific investments and investment themes in terms of where is the actual demand for capital, what’s the market size of these? What’s the likely growth rate? What are some of the companies that they could invest in? So it’s been a very interesting experience of serving so many different types of players across the entire nature dimension. But it also is a pretty strong signal to me that clients are really ready to engage on the topic and they’re just looking for the how to get started.
John: But I think that’s fantastic too for you personally because now I see why you take the very holistic approach of all stakeholders have a place here at the table. So it’s not just going to be one stakeholder that moves the needle, a corporation or a government or a consumer. We all have to play our part in doing better to make the world a better place together. There’s no silver bullet, you’re telling me. You’ve got a very diverse client base that gets to inform you, gets to hone your skills in a multidimensional way. This way, the more you advise each sector, the better you are advising the other sectors as well, because you’re put in the shoes of each different sector. Let’s just call the sector stakeholders here. So I think it actually goes to the expertise that you get to lend to each of your clients then.
Dee: Yeah. I think a lot of this I’ve learned across my journey at McKinsey. I just remember as a younger engagement manager, trying to figure out how to solution the mismatch between employers looking for employees of a certain skill and not being able to find that kind of in the job marketplace, and sitting at a conference where there was a state governor, the CEO of two large kind of corporates with extensive footprint across the US. Kind of the lead of a state university and a few nonprofits talking about what is it that this ecosystem can do when it comes to upscaling people for the right type of jobs. This also played forward when I was leading McKinsey’s relationship with the Mission Possible partnership. In the example that I like to talk about a lot, which is not a McKinsey-led effort, but something within the hard-to-abate sectors is the shipping industry, where there’s something that came online called the Poseidon Principles, and maybe you’ve talked about this previously on your podcast.
But I find it so fascinating that the ship owners and operators and their bankers said, “Okay, well, what is it that we need to do to decarbonize or accelerate the decarbonization of our sector and create the infrastructure that supports this in terms of the ships that are available to run on green ammonia, the ports that allowed this. How do we create the green corridors that says from point A to point B, we’re going to make this a green shipping route? How do we engage with the international regulators on tracking this data and holding us collectively accountable on what does it take to decarbonize?” I think that when it comes to nature and the broader sustainability agenda, that collective action of what is our path forward and how do we collaborate to create more value for the collective is important.
John: For our listeners and viewers who just joined us, we’ve got Dee Yang on with us. She’s a partner at McKinsey and Company. She heads up the Nature Capital that she co-leads Nature Capital and nature at McKinsey. To find Dee and her partners and all the important work they’re doing in nature capital sustainability, ESG, and everything else that makes the world a better place, please go to mckinsey.com. Dee, I’m a fresh entrepreneur with a company that’s hyper-scaling about to go public. I’m in your office, the door’s closed, the phones are off. I say, Dee I’m overwhelmed. I created this widget that’s making the world a better place, a more fun place, and it’s making my investors a lot of money. But I’m overwhelmed with this discussion of ESG, circular economy, net zero, sustainability, nature capital. Help me figure out how much am I supposed to do to be a viable publicly traded company with constituents to answer to, analysts to answer to, media to talk to, but also I want to run my company. I never really set out to be a big time tree hugger and environmentalist. How do I balance all the interests and how do you coach me to come on board with this journey, but still not lose the greater mission of why I created my company to start with?
Dee: Yeah. Maybe this is a counter view, but I remember sitting in Montreal at COP 15, which is the Biodiversity Conference, which is parallel to what takes place on climate. One of the chief sustainability officers said on a panel that she spends about 80% of her time on reporting alone. Eighty percent of her time is on reporting and making sure that the data is accurate and reflected in a way that it needs to be to meet certain standards. I just think that there must be so much that is really in her mandate that might not be getting the kinds of attention that’s needed because of how much of the burden has come from reporting and the data quality that she’s dealing with. I think fundamentally for a hyper-scaling startup or a major corporate that is thinking about the future, it’s less about being kind of the tree hugger and deciding that we need to make this fundamental shift.
But for me, I think the world is already showing us that it’s moving in the transition of a low-carbon future or a nature-positive future. This is happening, it’s happening in terms of policy, it’s happening in terms of where financing is flowing, it’s happening in terms of what kind of consumers are asking for, what corporates are asking for in terms of their supply chain. So the question is, how do you actually be relevant as a corporate or as a company in this different future in which we are low carbon, we’re nature positive, we’re sustainable? What is it that’s core to your business that makes you a relevant player in the future? How do you articulate the story that is about what you believe in what you’ve built and how it actually fits into this future vision that we’re all kind of marching towards at different pace, depending on geography? That story, I think, how does it fit into ESG? How does it fit into sustainability and how does it fit into nature positive?
Investors are going to be asking different types of questions, like that’s never going to change, right? But if you have the basics right of what are the things that I source? How do I make my things? How do I know about my impact in terms of my emissions, my water usage, my land use change, my pollution? These are things that I think as a responsible corporate, you should know because you’re depending on these resources and you have an impact on the ecosystem. Ultimately, we will get to a point where that kind of transparency will be available on the market to be packaged in various ways to feed the questions coming from investors and consumers and regulatory bodies. But I think it goes back to this who are you growing up to be question and how do you focus on that?
John: ESG seems to have become more politicized for my appetite than I think it should be. So let’s put that aside for a second. But net zero seems to be something that everybody’s rallying behind. Let’s go to net zero, let’s decarbonize more and more, as you say. How does nature positivity and net zero interrelate and overlap, so for our listeners and viewers to understand your definition of the overlap and how they can work together?
Dee: When McKinsey talks about nature positive or even nature, we often say it’s shorthand for the rest of the planetary boundaries. The planetary boundaries include carbon budget, but also includes some of the other things that I was talking about in terms of the water conditions, in terms of pollution. So, nature positive to me is a broadening of the sustainability agenda that says, yes, we need to talk about emissions, but if we don’t solve the other challenges that we face as society the planet won’t be one that is very pleasant to live on. So it’s important to think through those impacts as well. I think that there is an overlap in terms of solutions that ultimately repair and restore the health of our ecosystems and gets us back on the path to nature-positive. But that overlap is not 100%. So some things you might do because it is good for watershed health, but it’s not actually the best thing for carbon sequestration. So there are some overlap, but it’s not 100%, but I think it is very much in the context of every single sector and also in the geographies which in they’re operating in, to think about what are the ways that I can contribute to my net zero commitments that also have positive impact to nature positive, and what else should I be doing on both ends to fulfill what I’ve set out to do in sustainability.
John: Dee, let’s go back to the previous example that you just gave, the great example about the young lady who was on the panel up in Canada that you were in the audience with and she spends 80% of her time as a chief sustainability officer on reporting. Does she walk off the stage and you put your arm around her and say, “I’m here to help.” I mean, how does that work really? Because it sounds like you could help her, how do I say this the right way, reprioritize her time so she could be making a bigger impact at the firm as the chief sustainability officer, instead of really more of a numbers cruncher or even a fact checker, let’s say.
Dee: I think in the chief sustainability officer’s agenda, there are lots of things to juggle and also lots of complexity because the role of a chief sustainability officer is a relatively new one, and some of them are relatively under-resourced versus a head of a business or chief financial officer. These roles are very clear as to what is expected of you versus the chief sustainability officer, which often juggles many demands and is working almost as a connector across different pockets of their own organization, whether that’s with investor relations at the heads of business, the C-suite, et cetera. There is, I think, various ways in which we’ve supported the chief sustainability officers like [inaudible] that is around prioritization, but also thinking through what is the infrastructure that you might need or the organization would need to build in order for her to shift her reporting time from 80 to, let’s say 20. Because fundamentally that data collection is an infrastructure question.
Like, what is the data that you need and how do you actually get it from your suppliers? What are the changes that need to be made within procurement? So it’s not simply one that says you need to shift your attention elsewhere, but here’s what you can build in terms of enabling infrastructure that then allows you to do your job with less focus only on reporting alone and shifting it to potentially innovating for new products and new services that change up your business offering.
John: Which I’m sure they would enjoy doing a lot better themselves as well. I mean, I’m sure it would make their job a lot more fun. Go back to what you said earlier. You mentioned part of what you do at McKinsey is creating, and I don’t want to misstate but is sort of a KPI scorecard for nature positivity. How does that look and how do you make those tools available to your clients so they can, as you say, report on what’s important to their industry, show it the right way, make it easily digestible, so again, it decouples them from just not crunching the numbers because you’re able to give them a better way of doing this.
Dee: There are two versions of this that we do with clients today. One is relatively bottom-up, one’s relatively top-down. So the first one is, we are now working with a number of clients through taking a set of their products and saying, okay, by product, looking at where you’re actually sourcing your inputs from, give us the file that says, okay, well, let’s draw the boundaries around the region that we’re sourcing from. We can tell you what are the nature characteristics of the ecosystems that you’re sourcing from today, and tell you what is the impact that you’re having on these ecosystems, on the planetary boundaries that matter for you. So if you are making paper products as an example, where are the forests in which you’re sourcing from? How does that make its way into your paper products and then makes its way into consumer shelves?
We can do this for a number of other things. It is almost a product-by-product view of what is your impact today, and therefore, kind of the fundamental KPIs or metrics that one could start with in terms of their reporting. Another one is a set of tools, analytic tools that has been created by Vivid Economics, which is a sustainability-focused consulting firm that McKinsey acquired about two years back. in their service line for nature, there’s a tool called Nature Risk, which we use often with institutional investors, with financial institutions that says, across my portfolio of corporates, how do I think about my exposure to risks or nature risks both in terms of what do I depend on from the various natural resources, but also what is the impact that I have on these ecosystems, which could land me in, I don’t know, added financial costs if, for example, deforestation regulations came online in force, if, for example, water price shocks showed up, if, for example, consumer demand shifted, what is the impact on the financial value top down?
We can do that now also for corporates to say, you company A, where do you sit on a spectrum compared to peers within your industry in terms of your ability to adjust and your exposure to these kinds of risks? I would say that that is largely a starting point. Knowing what your baseline is or how you’re performing against some of these metrics could inform where you go in terms of your strategy and where you could potentially make commitments and how you can change your business over the course of the next 5 to 10 years. But the metrics are not the end goal here. Like we would want to know that for transparency’s sake, but like, once you know it, it’s a little bit of, okay, well, like what do I do next? What are the ways in which I can positively impact these KPIs so that I’m performing better and having less impact on the ecosystem over time?
John: Dee, I’m a CEO of a company listening to this show or watching this show, and I realize I need to get on this journey. How do I get started? Again, things always seem probably more daunting than they really are for those uninitiated. How do you put one foot in front of the other and get going here?
Dee: I think that “How do I get started?” is often a question that many ask us. What I think will be different with nature is the rush to make net zero commitments that happened. I’m really glad that the momentum was there, but a lot of people made those commitments and then afterwards looked around and was like, “What do I do now? I made these commitments. How will I actually achieve them? I said, I’m going to get to net zero in terms of my finance portfolios, but what does that actually mean?” I think part of the lesson that has been learned hopefully, is starting with a baseline of what your activities are today. Everyone complains that biodiversity or nature has so many different dimensions, so many different things to track, but to me it’s relatively simple. It’s where you source the inputs to make the goods. Where do you make the goods, where do you sell those goods, and what’s the afterlife of those products?
If you take this kind of end-to-end view, what you can start with is the question of across this kind of supply chain or value chain view, what are some of the places in which I think is actually material to me and materiality in terms of am I a major consumer of water? Am I a major consumer of natural resources? Where I mine my critical minerals, what are the impacts to those ecosystems? Most corporates will at least have a view of some of these metrics within their four walls. So if you take many manufacturers, they’ll have a sense of how much water is being used in production. What they likely won’t have is the view of what happens outside of the four walls. So what will happen in the watershed surrounding, what’s the health, how is that going to change over time? That’s the kind of starting point for most corporates, is one, understanding the places in which they’re sourcing and where are the ecosystems that they’re sourcing those from, and then ultimately, what’s the health of those ecosystems as a starting point. then having a relatively more informed conversation around where can we go from here?
John: Got it. Dee, what’s more fun for you working with a startup that’s a bright-eyed, bushy-tail entrepreneur, clean slate when it comes to ESG sustainability and non-politicized person who really wants to do the right thing, but needs the good guidance from you and your colleagues at McKinsey or working with one of these legacy industries, huge company sort of jaded CEO, but if you get him on or get her on your side, you could really move the needle because it’s a very large industry already and there’s a lot of competitors that will follow. What gets you more jazzed yourself now in this whole journey to make the world a better and greener more nature-positive place?
Dee: I think it’s a little bit in between those two. Given what I’ve seen when it comes to coalitions and first-mover agreements and collective industry action, I think you need both sides of these at the table. The challenge is figuring out how to get these stakeholders to talk to each other and get on the same page around what is it that we can accomplish. For corporates, there is the kind of potential of setting a new standard for their entire industry, right? So if you have one of these major movers for their sector, when they’re taking action, others are looking and saying, “Well, what is company A doing? They’re such a leader in the space. How do I actually emulate that? What do I have to do within my strategy to be there?” If you take some of the leading examples, I like this one a lot where Walmart and HSBC worked together in order to provide financing to the supply chain to shift to a more sustainable future. Like that’s really interesting.
When you take two majors like that, others are looking and saying, “Well, how do I do that?” Which I find really fascinating. But also if you take innovative smaller organizations like Patagonia who are taking a stand and saying, we are shifting to a nonprofit and our profits are going towards restoring nature and the earth, that’s also a major event that people look at that and say, “Wow, that’s really changing things up. How do I be that?” Then also promises of startups that become unicorns. You say, well, really there’s a business here and there’s value and building something that is from the initial creation of this business with a sustainable purpose. I think that gives hope that we can actually make our way towards the kind of net zero or nature-positive transition.
John: Speaking of hope, McKinsey’s always on the cutting edge. It’s one of the greatest organizations in the world when it comes to advisory services and consulting. I have a lot of friends there. What initiatives are coming up that you’re particularly excited about that you could discuss?
Dee: I think that’s a hard one in terms of what is it I can discuss. In the space that I am working in one of the paper that is due to come out and also very close to to Mark Patel is we have a McKinsey platform for climate technology. We’re about to put out a new snapshot of this in terms of a stock take almost, and what are some of the major unlocks? I think the work that we do in order to push the uptake of these new technology, which includes nature, is an exciting thing. The other thing that has been really interesting for me is that we’ve been hosting these green business building summits, and the last one just took place in Stockholm where we brought together investors, incumbents, startups, and it was really quite a very energized two or three days around what is it that we can do to accelerate innovation. I think that’s also pretty fantastic in terms of making these connections across geographies, across technologies, and sectors.
John: Got it. Dee, I can spend hours with you today and I’ve just appreciate the time you took with us today. You’re always welcome back on the show. For our listeners and viewers, to find Dee and her partners at McKinsey that are making the world a better place in nature capital, in sustainability, and all things green, please go to mckinsey.com. Dee Yang, thank you for making the world a better place. Thank you for making the impacts that you make. You’re always welcome back on the Impact Podcast show. Thank you for your time today and all the service you do to this great planet earth.
Dee: Oh, thanks for having me, John.
John: This edition of The Impact Podcast is brought to you by Engage. Engage is a digital booking platform revolutionizing the talent booking industry with thousands of athletes, celebrities, entrepreneurs, and business leaders. Engage is the go-to spot for booking talent, for speeches, custom experiences, live streams, and much more. For more information on Engage or to book talent today, visit letsengage.com. This edition of The Impact podcast is brought to you by ERI. ERI has a mission to protect people, the planet and your privacy, and is the largest fully integrated IT and electronics asset disposition provider and cybersecurity-focused hardware destruction company in the United States and maybe even the world. For more information on how ERI can help your business properly dispose of outdated electronic hardware devices, please visit ERIDirect.com.