Adobe Inc. (ADBE) Earnings Call Transcript & Summary

As Brian said, we're now turning our eyes towards environmental, social and governance mandates with Chris Marsh. So Chris, I'll hand it over to you.

Brilliant. Thank you, Eric, and good morning, everyone. Welcome to the session on ESG and Technology. My name is Chris Marsh. I head one of the research teams here in 451 Research within S&P Global Market Intelligence Division. I'm also involved in helping coordinate our ESG research across 451's different research practices. I'm very fortunate today to be joined in this session by 4 expert speakers on this topic. And when I say expert, I really mean expert. We've got 4 speakers with a real depth of experience focusing on issues of sustainability and the sort of wider ESG umbrella. And of course, they're going to help us explore many of the key issues that are relevant in this ESG mandate that's in front of us. So I have with me Manjit Jus. Manjit's actually one of my colleagues here in S&P Global. He heads our Global ESG Research at our newly formed Sustainable1 organization. We have JJ Davis, who is the SVP of Corporate Affairs at Dell Technologies, where she oversees not only everything corporate social responsibility, but everything global communications as well. We have Edan Dionne, who is in IBM, the VP of Environmental, Energy and Chemical Management Programs in the Corporate Environmental Affairs Division of IBM. And last but certainly not least, we have Mark Heintz, who is a few weeks into the job, I think, Mark, as the new Sustainability and Social Impact Lead at Adobe. So Mark, JJ, Edan, Manjit, thank you very much for joining us today for this discussion.

Glad to be here.

We decided for this panel not to throw a lot of slide where we have a lot of ground to cover in this discussion. And again, 4 speakers who have an awful lot of expertise and experience to share with us around these issues of sustainability and technology. And so really, we want to reserve most of the next hour for you to hear from them and to learn from that expertise. What I do want to do, though, is just to give a few opening remarks just to set some context. I think for some of you, ESG will be something that you're already living and breathing within your organization. I think for many others, though, maybe you're coming to this with a bit less familiarity. I think in 451 Research, we feel pretty safe in saying that how to treat ESG issues is really shaping up to be one of the key questions that businesses face, that investors face over the coming decade. And I think, especially for large organizations and public sector organizations, all the evidence is there that it's quickly becoming a strategic imperative. We see, of course, there are long-term commitments being made to address issues around climate change and the pandemic and the social justice movements that we've seen become very apparent, of course, over the past 18 months or so have thrown more of a spotlight on some of the social issues, which have perhaps been the least defined area of ESG. And ESG is increasingly being brought into sharp focus within organizations yet it presents, I think, a lot of different challenges for organizations to grapple with and to get their head around. It's a broad mandate. It's a complex mandate. There are lots of competing standards and frameworks that organizations need to make decisions around frameworks that they try and give definition to ESG. We also can see on the regulatory side the rules around the SGR influx as regulators across different domains geographically are making their own decisions on what should be mandatory within company disclosures. One thing we do know as a team of technology research analysts is that the range of discussions around ESG are becoming more frequent, more specific, more strategic. We see this in terms of inbound conversations we're having with technology suppliers, but also with our enterprise customers who are increasingly asking us for opinion on how they should be thinking about investments that are making in different type of technology and how they impact or not -- ESG commitments they might already have made or may be thinking about making. We have lots of really interesting research and data around ESG and adoption of different commitments. We have some very interesting data from our Voice of the Enterprise surveys, that show just around 1/3, I think it's something like 29% of organizations say they currently have a formal strategy around ESG. But we also see, at the same time, more organizations beginning to shift their view from seeing ESG, not just as a cost of compliance, which I think historically is how many organizations have seen it, to something that can deliver a much more positive ROI, right, whether that's around reducing their exposure to a range of different risks or whether it's outright improving their baseline financial performance. So we see the narrative around ESG begin to shift as companies look to get more on the front foot. They're also increasingly wanting to know we can see from the research not just from an ethical procurement perspective that their technology suppliers are taking sustainability seriously, but increasingly, those technologies and services that they're procuring from their suppliers can directly impact their own commitments that they're making as an organization. So that's coming on strong as well. And so going forward, we thoroughly expect ESG will become a growing part of the information technology industry narrative over coming months and years. And just to plug some of our own research quickly, if you want to see some perspective from 451 analysts, we produced a really interesting piece of research that drew on insights from our data center team, our cloud team. We have perspectives on the impacts of trends in information security technologies on ESG mandates. We look at AI. We look at the customer experience, employee experience. You should be able to find, I think, a link to that report or the PDF of that report in the Resources tab of the console that you're currently in. So please, at the end of the session, do you feel free to check that out.

Okay. That's probably enough for me, I think. Let's open this up to discussion. Before I do that, let me just remind you and especially if this is the first of the next sessions you're dialing into that you can actually submit questions. So please feel free to do that through the console. We'll try and get to as many questions as we can towards the end of the session or throughout if I see them coming up. And any questions you do ask, we will commit to answering them if we don't get to them in discussion. So again, if you have a question, please feel free to submit it in one way or another, we will come back to you. Okay. So let's open this up to discussion. I'm going to ask this question to each of you, but Manjit, maybe we can start with you. Let me throw this first question your way. You've been involved for a long time in assessing company's ESG commitments. Across different industries, you have a very interesting perspective that plays not just to the technology industry, but much more widely than that. So help us level set a little bit here. We're about 20 years or so, I believe, into "ESG" being used as a term, whatever that means. But where are we in the overall trajectory of ESG as a movement. Are we still early days, would you say? Is it beginning to mainstream? Just help us understand a little bit, if you wouldn't mind where we are in terms of the overall maturity of this as we look across different industries.

Thanks, Chris. So I would say we've been doing this for over 20 years. So probably as long as that term has existed, and it's gone through various kind of shapes and forms. I would argue that companies have certainly understood sustainability much longer than the rest of the world has or the rest of the market has. So we certainly see that investors are now slowly starting to understand how sustainability has implications in the real world and in business value. But I would argue that companies -- or many companies have understood this for a long time, even though they possibly weren't measuring it or they weren't able to take kind of these intangible things that are often associated with measuring sustainability and turn them into numbers that they could use. But if we look at kind of the way we've interacted with companies over the last 20 years, certainly, we went from having 300 companies engaged with us in our annual assessment process right at the beginning to close to 2,000 of the world's most kind of important companies engaging with us this year. And I think that is clearly a sign that reporting is becoming more robust to allude to something you said earlier, there is regulation that's changing very quickly. Companies want to get ahead of this. But also, I think, they understand that the market is valuing sustainability and the integration of sustainability into business practices and that push, I think, from an investor perspective to companies has also helped companies understand more tangibly why sustainability is important. And it's not just about cost savings or avoiding risks and avoiding risks of noncompliance, but it can actually be something that drives new opportunities. And I think especially in the technology sector, it's all about kind of innovation and driving new solutions to solve problems. And I think as climate change and other, kind of these macro trends that are very much behind all of these ESG issues kind of materialize, I think the tech space is perfectly kind of situated to address a lot of these challenges.

Yes, that's great. I mean when you look across these 2,000 companies that are sort of engaging you with assessments, are there any sort of noticeable differences would you say in terms of engagement with this mandate industry by industry? Or is it safe to say that across all the core major industries, companies are beginning to take this more on board?

I would say it's certainly across all industries. I mean, very much, I think the industries that were early on affected by negative kind of press or social kind of pressure to do things in the area of sustainability are certainly the ones that led or the companies that have real immediate impacts related to climate change or resource use are certainly the ones that kind of led the way whereas companies maybe in the service sector, where ESG risks are perceived today still be relatively low, they possibly lag behind. So we certainly see that there is, I would say, more maturity in some industries where these things are maybe more obvious. The technology is certainly a good example of an industry that I think early on understood sustainability, especially for manufacturers, supply chain risks, that were widely kind of reported on -- in media. But the other, I think, nice thing to see is that geographically, we're slowly moving away from this concentrated focus of ESG information and leadership in Europe to the rest of the world. And we see the U.S. is picking up, but also Asia, Latin America, these are emerging economies where you really get the sense that companies are trying to go above and beyond what has been done the last 30 years and tried to kind of do something very quickly, but also do it in a way that's quite impressive and quite sophisticated. So that's nice to see that we slowly are getting this kind of global parity in terms of ESG information.

Yes. That's great. That's really interesting to see how it's sort of rebalancing. That's, of course, a sign of maturity. Edan, maybe if I can bring you in at this point, you've been involved in the E of ESG for a long time. And of course, that's where a lot of the focus still is, companies increasingly making more concrete and specific commitments around climate change issues, environmental impacts. What's your take -- because you've been thinking about this for a long time, what's your take on how things have changed over time? And where we are at the moment when it comes to companies focusing on environmental issues, but also where those environmental issues sit alongside maybe other commitments in this wider mandate that they're also looking to embrace?

Yes. Thanks, Chris. And I would just build upon what Manjit said earlier. As you mentioned, as a company ourselves, IBM is over 110 years ago. And the benefit of being a long -- company has been around a long time and have been a manufacturer for a long while. I mean we were vertically integrated through almost early 2000s, right? And we still continue to manufacture. And as Manjit said earlier, that experience actually inform us to continue to gain deeper and deeper understanding on the E part of the ESG. And I would also agree the social part is less defined, but let me focus on E to answer your question. So the -- I think, first and foremost, inform us about the real substance about the environmental impact or environmental benefit, however you look at it from certain operations before the onset of ESG, if you will. So I think in that sense, those companies who have had to deal with whether it's regulation or external pressure or whatnot, I think relatively speaking, would be at a more mature place of the curve. But as it's been mentioned, today, certainly, global companies recognize ESG is strategically important. And even as Manjit said correctly, it's really geographically this item has been embraced. And we are seeing regulators, some countries, some geography may be more mature than others, but it is catching on. And I would say one last point is, hopefully, we will begin to see companies advance beyond goal-setting and advance beyond -- into basically integrating what we need to do into operations. And that is -- hopefully will come out during this discussion as we have this back and forth. And to me, that would be a key indicator showing the continued advancement of this topic, move from paper, from goals, from strategy to operation to integration. So ESG is not a separate item. We, within IBM, has had the time and history and experience to drive the integration of this topic into the business. And I think that will be a good metric, good test.

Yes, that's a really interesting point that there's making commitments on the one hand or deciding what commitments are important for you to make, and there's actually embedding that within your operations is a wholly different thing. And I think when we look at certainly some of our primary survey work amongst enterprises, there's a whole spectrum of different challenges there in terms of how to make more material of the commitments that you've decided to align with, and of course, then how to report on them. So we will definitely get into some of that discussion, I think, in the next question. But JJ, maybe you can help share your perspective. This has been a focus of yours for a long time. You obviously speak to a lot of Dell customers and other organizations. What's your kind of overall sense of where we are at the moment and what level of momentum we're likely to be seeing over the coming couple of years?

Yes. And what you guys are talking about is exactly what we're seeing. So a lot of our European customers have been out front, certainly on the E of ESG. For many years, we took Nordic-based companies deep into our supply chain in China, as an example, to give them visibility into the working conditions of our factories or that of our suppliers. We also use virtual reality to try to do that, so you wouldn't have to get on an airplane. We've seen a lot of our customers, now 95% of them, have some kind of primarily sustainability, but sometimes broader ESG question or requirement within RFP. So 95% of our RFPs asked for information on our sustainability or ESG strategy. Some big customers out of Europe are even putting about a 15% weighting on that. And so you're actually seeing us win business on the back of sustainability, maybe more than ever before, and that will only continue to grow. One thing we added in the spring of this year is a very specific sustainability customer advisory board. It's a very high-caliber group of customers. Boeing researchers, IKEA, BlackRock and others come together. We curated this group. It's Chatham House Rules in a closed forum. They're opening up and solving problems together, and we had 100% take rate on the invitation, which is kind of unheard of. It just tells you what a big opportunity this is. And I'll tell you that some of the work we're doing with Boeing, as an example, we do quarterly business reviews with them and the CIO and the Chief Sustainability Officer coming together and talking about their digital transformation with sustainability at the core, and so how do we help with technology at the center, companies in all sectors, as Manjit was talking about, really solve business problems, their customer problems and address really important societal requirements and needs. And so it's only going to continue to grow.

Super interesting. JJ, what was that statistic you mentioned earlier? I think, was it 95% of customers have some kind of content in their RFPs around sustainability? Was that the...

That's right. That's right. And for our Dell Technologies select customers, the biggest of the big multinationals, more than 50% of them have their own climate goal as an example. And so if they have any hope of achieving their climate goal, they're going to need IBM or Dell or other technology companies to help them because it's going to really come down to a lot of green IT solutions and how their use of electricity and infrastructure starts to evolve and change.

Absolutely. Mark, let me ask you your perspective. I mean, a very interesting background. Now at Adobe, you were previously at HP. You've worked independently, helping organizations set up their CSR and ESG programs. What's your take when you think across all of those experiences, and I think 20 years or so been having -- been involved in this space. What's your take on sort of where we are at the moment and how maturity has changed with companies beginning to want to make both commitments but make more material their adoption of those commitments?

Yes. Great question, Chris. So like you said, I've done this in several different sectors and the focus on ESG has increased significantly in the last year or 2. And it's just been growing even faster. And it seems to be sort of driven by 3 sets of stakeholders. When I look across sectors, I see the same thing, to your earlier question. The first one is around investors and analysts. And as we all know, the ratings and rankings are prevalent in all over the place and becoming more important to investors. I think our boards are hearing from the investment community on the focus here as well, ESG focus. The second group of stakeholders that are driving this are employees. And sometimes our employees are our toughest stakeholders, asking really difficult questions. And it's -- having a solid ESG program is a great way to attract and retain talent. And I think more and more companies are starting to figure this out. And it's -- like I said, they are a tough group of stakeholders at times. And then the last one, to JJ's point, is customers. So I've -- in my short time at Adobe, I've been brought into a number of customer situations where they want to collaborate, they want to know how our tools can help them minimize their carbon footprint, their environmental impact. So these stakeholders, I think, are really sort of driving ESG and it's -- like I said, it's -- the importance of it has increased significantly in the last couple of years.

Yes. Really interesting perspectives. I mean the employee comment was particularly interesting, partly because the team I lead in 451 is the workforce productivity and collaboration team. So we focus a lot on issues of employee experience and what drives employees' engagement. And we see signals of this as well. The criteria at which employees are using to decide where they work is changing significantly, I would say. And technology apart from what they're wanting their company to align with from a sort of mission statement values point of view, I think the technologies that they're using day to day are increasingly playing a role in determining how they evaluate their employer and from a career progression point of view where they want to take their career and who they want to work for. So I think technology is becoming increasingly central to a lot of these different issues. So super interesting. Just before we move on and talk a little bit more specifically around what each of your respective sets of clients are asking from you or wanting to see from you, maybe just sort of fleshing out some of these issues just a little bit more. I think for a lot of enterprises who are maybe less mature in terms of their overall ESG approach, they may be asking the question, what's the difference between CSR and ESG? What's the link between these 2 things? Are they the same thing? Is ESG a maturation of CSR? Is ESG, in some way, sort of a bigger way of talking about the issues involved and CSR is the way that companies operationalize commitments they're making in the wider sort of umbrella? So JJ, maybe you can give an opinion on that. For those that are trying to get their head around, is it CSR, is it ESG? Does that distinction even matter anymore? What would you say?

We're actually doing a cheat sheet of definitions internally right now because even in a company as mature in this area as we are, there's a lot of confusion. I do think ESG is the maturation of CSR. What I would say is a few years ago, we were thinking a lot and talking a lot about the rise of corporate reputation and the fragility of that, and it's important. Then we started to really focusing on the purpose of the company and our CEOs have all signed on to the business roundtable purpose statement as an example. Now I think it's all about trust which ESG enables. That's where transparency really comes in, the marrying of ethics and security and privacy. Is this a company I can trust, meaning do I want to do business with them or work with them, which those things are really new on top of maybe diversity and inclusion and sustainability as an example. But that is what I think is most exciting now about the broader ESG purview and mandate is you're marrying those things together so that stakeholders can really say, "All right, I want to do business or work for a company that marries who they are with what they do, and that's really important to me." And so I do think we are kind of retiring CSR as the term internally. I just hired a Vice President of ESG and thought long and hard and did a bunch of research on even what I wanted to use in that title because I think it is so much bigger and corporate social responsibility to me makes it still sound like doing good is good business and social impact sits off to the side versus to it on point, it's integral to the operations and the heartbeat of the company. And if you don't make ESG performance, over time, as important as financial performance, you're going to miss the mark.

Super interesting perspective. Manjit, maybe just before we move on, just going back to some of the comments you made, and I'm recalling something you said to me in the prep call we had for this session, I think, last week where -- whereby some of the things that maybe weren't considered ESG issues are now being considered as such. I'm guessing that was an allusion maybe to some of the social sort of commitments that companies are increasingly working into this overall kind of rubric or was it something else that you're referring to? What sort of net new in terms of what people are considering falling under ESG that maybe they weren't before?

Yes. So I think it is important to remember that this is not static. I mean, this is -- we are living in a constantly evolving, changing world where new kind of concerns are coming up all the time and things that may start off as a concern to a small group of stakeholders may, over time, very quickly materialize into something that is pretty impactful for the business. And so areas that we've seen over the past years kind of materialize. Things like tax transparency wasn't seen as being an ESG issue. When we put this in front of companies, they thought we were crazy, and they had the people and the sustainability teams have fights with the people and the tax teams to get data on why they should have a tax policy looking at probably transparent taxation, but we've seen how that has materialized over the past few years, right? It's -- there's regulatory discussions. You had consumers boycotting certain companies because of concerns over fair taxation. So there are these kind of nascent issues that become more relevant over time. On the social side, I wouldn't say that these things are -- I wouldn't say we see so many kind of new topics. The diversity has always been around, understanding that human rights need to be respected in discrimination. But I think what we've seen, especially over the last kind of 2 years is that they have manifested themselves in ways that companies probably couldn't imagine before, whether that's companies walking out because they don't agree with remuneration policies or certain practices around equality or really kind of an understanding that there are very kind of deep impact on society that have to be considered when looking at this. And it's not looking at inclusion and looking at human rights, it's not just limited to companies with mining operations in Australia. The human rights are something that are relevant for everyone. So that's what we've seen, is a better understanding of these issues and also possibly a better understanding of how to quantify these in terms of how they really impact the business.

Yes. That's really interesting. I mean, I think it was a point well made about this not being static. And I think that's obviously a challenge I think for companies who need to decide what commitments they make. But I would assume also there's an opportunity for companies because they can put their own identity against, of course, the commitments they're making. They can work it into what they're saying they stand for as a company. They can sort of, if you like, personalize the commitments they're making and help that define the purpose that they're understood as representing as a company, which, again, going back to the comment, Mark, you made about sort of employee retention, I think, is increasingly important. So not static. That's a challenge, I think, potentially also an opportunity for companies as they get deeper into taking this on as a set of commitments. So let's change the focus a little bit. Let's go a little bit sort of pull it down in a couple of levels. And think about how technology suppliers can specifically help your customers on the ESG journey, right? So there's quite a few things, I guess, to unpack here. Overall level of engagement with the mandate we've talked about a little bit. So I guess 2 questions. And again, I'll ask this of each of you and Edan, maybe we can start with you, but what are they expecting to see, because I remember one of the comments you made when we were doing our prep call around how you're increasingly being brought in as an expert into customer-facing engagements and being asked to provide expert input. So I guess you're increasingly hearing from customers the kind of things that they want counsel around. So I guess 2 questions really as part of this overall topic, what are they expecting to see from IBM's own commitment to ESG, right, when they want to tick those boxes, but also what are they expecting from you vis-a-vis investments they're placing with you, right? Is it just more sustainable IT solutions? Is it more consultative support when it comes to setting up programs? Is it just better data and telemetry from their IBM investments to support reporting? Give us a sense of sort of what they want to see from you and what they want from you to help them make their own commitments more material.

Sure, Chris. So the first one is probably a shorter answer. In terms of what I experience when I got brought in to talk to the clients, I think the flavor goes, some are genuinely interested in what has been your journey, right? As I said, we have been doing this for 50 years formally. We've had policy. So we were able -- I would be able to explain how we identify the important intersections of E matters to our business. So we will share that how we strategically manage down to the nitty gritties of data, metrics, how do we measure performance and so forth. And there are also clients who -- all right. It really depends on where they are, each client, as I would mentioned earlier, the maturity and what industry sector and different goal-setting. So for us, it's the desire to see how a technology service provider itself handle this matter. And it's -- and also, it's a matter of establishing the credibility, the trust with the client that we have -- we are ourselves, right, expecting ourselves to perform well. So that is kind of the first part. And again, in terms of topic, it ranges from very nitty gritty to strategics, depending on where the client is, their maturity. The second question, right, you asked about what do clients look for. So let me just step back to first start by saying today, we have 3 major business lines in IBM, right? We have IBM Consulting; Infrastructure, which includes hardware systems, zSeries servers and so forth; and our software, right, AI, hybrid cloud. So clients come to us, ask for expertise in all 3 areas. So let me take the consulting, IBM Consulting. Under that would include clients asking how do I do reporting, as you mentioned, right? And I think that is probably one of the most basic steps all companies expected to do. But then you can advance that to -- there are others who were quite sophisticated. An example will be they're actually looking at how do I mitigate risk and how do I turn that into opportunities? So risk is not just climate, but certainly, climate is an example, right, whether you're in a financial sector, insurance sector. Those are real business intersections, and they are very sophisticated. They understand that. Or a company that is in the energy sector, right? How do we operate? How do I provide energy that is more sustainable literally, less environmental impact and while helping society and company to operate with continuity, right? So consultants, our consultants will be advising clients from, again, basics to risk management to opportunity arena -- to the arena. Take software, take hardware, again, I see clients to be very sophisticated today. No longer are clients only looking at cost of a piece of hardware, right? They're looking at the cost of ownership. So you take a server that is energy-consuming, as a piece of energy-consuming equipment, they want to know how you make it, but that's not enough. When I use it, how much energy do I draw, right? How do you help me select the servers for my application? But depending on the application, right, sometimes a very -- some applications are very competition-intensive and how could I use that equipment to best get my job done while using the least amount of energy. And the last bit, I will just give you as an example in the hybrid cloud, AI space. It's the same situation. Clients not only expect us to be running their workloads in a way that is energy-efficient or use the renewable energy when you're able to get that, they are also interested in collaborating with IBM as a service provider to say, well, I had this workload. What are the opportunities I may be able to run it more efficiently, right? How can I move workflow around, how can I do management? How could I even share a virtual machine with others provided there is privacy, security, all of the bells and whistles that you continue to commit to me, IBM, but I'm willing to explore opportunities to work on hybrid cloud or a virtual environment to reduce energy demand. So it's really all across the board, and we welcome these discussions with clients. And many of them, as I said, are very, very sophisticated in their business.

Yes, that's interesting, quite how sophisticated some of the clients seem to be in terms of both what they're asking you, but also what they're wanting from you to support their own strategies. JJ, you mentioned both earlier and when we spoke a few days ago about the new Sustainability Council, which, am I correct in saying, was new this year, so an initiative you've set up this year comprising some of your key customers. Can you just describe to us how they're thinking about ESG? What are the kind of things they're asking from Dell? At what level is this conversation? And maybe to the extent that I'm guessing they're sort of early adopters or sort of digital leaders, how does that differ from maybe other Dell customers that are maybe a little bit earlier in the journey and the kind of things that they're both expecting and wanting to see?

Well, certainly, if you're a pace-setter, if you will, in digital transformation, you're going to be pulling away competitively from laggard and we certainly see sustainability playing into that. Yes, we did set up the Sustainability Customer Advisory Board to both -- we go to them and pre-brief on new strategies that we want to bring to market. So for example, in our as-a-service transformation, there are so many benefits to sustainability, whether it is recycling, are we using old technology and how do you retire that. Sustainably, think about -- for APEX, our as-a-service offer set and transformation, you could not only determine what technology you need and dial that capacity up or down, but when it's time to retire that technology to end of life, it's probably too new to recycle, but maybe a school or a nonprofit might want that technology, and then we can facilitate that for you. Or what is the carbon footprint of the solutions you're running or through our partnership with Equinix and other colos, they're going to get to renewable or energy faster than data centers maybe run by others. And so all of these things come in where we can use this advisory board for early feedback to see if we are actually focused on the right things. We have big ears, as Michael says, really listening to their problems and trying to help them solve them. And then they also use us and each other to be super vulnerable and say, well, I haven't actually launched a social impact or ESG report, Dell. You've done it now for -- we had our first set of goals retired in 2020 and has set a new set of progress, made real social impact goals for 2030, and we help advise each other. There's a lot of talk right now about carbon buybacks. And is that okay? We know by 2050 to get to net zero, that won't be okay. But right now, it's near impossible to really start to think about carbon offsets or net zero, if you're not factoring in some form of carbon buyback, but what's acceptable, nobody knows. This is completely new territory. And so they really use each other to make some of these decisions, and it's a great peer-to-peer network. And certainly, technology has been at the world's -- center of the world's recovery as it relates to COVID, and it's going to be super key when we put out our net zero goals by 2050. That factors in Scope 3. And what we say is our technology in use out in the wild, and that will be the largest and most difficult category to overcome, and we don't have it all figured out yet. But we will have to partner with our customers and our suppliers if we have any hope of achieving our own goals and if our customers want to do the same.

That's great. And Mark, same question to you. You're relatively new in Adobe. So this is putting you on the spot a couple of weeks in, I guess. But what can you gather from having spoken to Adobe customers already about what are they expecting to see from you? And as they think about Adobe technologies that they're using, what they want to see from you in terms of supporting commitments they may increasingly be making? What does that sound and look like?

Yes. So -- interesting observations for me. So it feels to me like the operational part of it, like what Adobe and the other clients are sort of doing on their own operations is really table stakes. They expect that, you're reducing your carbon footprint, that you've got aggressive goals out there. The part where I think they really want to collaborate is on the products. And so for Adobe, we make products that help digitize processes. And specifically, our digital signature product called Adobe Sign has huge environmental impacts. And so we found that our customers want to understand those better. And it's funny for me because I've -- the last 10 years, I've been starting up and helping other companies start up their sustainability programs where they haven't done before. And as I was developing the program, I wanted to understand what the benefits were of the digitization that happened in various processes throughout the company. And I would try to figure this out, and it was very difficult. And so that's what customers are doing now. They see that Adobe produces and creates this product called Adobe Sign. We've got other sort of products around 3D substance where you can do virtual photo shoots or you can do prototyping virtually as well. And they want to understand those environmental impacts. And so we've actually generated this resource saver calculator that helps people understand when you do a digital signature, here's the savings in terms of carbon footprint, savings in terms of money, water, energy and so on. So that's really what I've seen so far is just this hunger and this need to understand how these digitizing processes, these products that Adobe Cells can help them reduce their footprint.

That's a really interesting comment as have all the comments been on this question. I mean if you sort of go right to the question of the performance of the technology and then the environmental and other impacts of the technology. So -- and it seems like from what you're saying that the -- maybe not the balance is shifting between those 2 things, but companies are being much more mature and savvy about how they're appraising both of those things. It's not just a matter of performance anymore, that they also need to see that, along with performance, they're also able to have the technology and state that supports whatever commitments they're making. So that's certainly something we also see through our primary research, just that sort of equation change in people's minds. Maybe if we can just dig a little bit deeper into this overall topic. And Edan, you made the comment earlier on, a really interesting comment that embedding a sure sign of maturity around ESG adoption will be where commitments are actually embedded into business operations, right? And that's the nitty gritty of it, and we could talk for hours endlessly about how that needs to be done, different ways to think about that. But maybe each of you can just share some perspectives on -- for a company that's maybe sort of less mature on this that sort of has decided what commitments they want to make, but they're not quite sure how to tie the maybe ambitious set of commitments and the actual operationalizing of those commitments. What kind of things should they be thinking about? Like what's -- is there any sequence there? Is it commitments helping the data, creating metrics, doing the reporting? How do you -- how would you advise companies as they're just thinking through what the sort of overall pieces need to be here to actually mature operationally their ESG commitments? Edan, maybe I can throw that to you and then JJ may be after.

Sure. Sure. Sure, Chris. I will say data is definitely important. Data is key to making decisions, and you want good data, you want primary data where you can get your hands on. So if you are an operator, you align business unit within the company. So how do you do that? Do you start with data? Do you start with metrics? Do you start reporting? I think I will put data and metrics closer to one another, where you have the data and then that will enable you to make a decision, which could be a goal that you want to set, okay? Another example of a decision is these business leaders know their business. Let's say, you're in a -- you're in procurement, you're shipping things around, right? You know your business goal. And what integration means is to have the data and to understand when I ship stuff around, when I have a truck out there, what is the environmental impact? And from there, you set a goal that help you do your business better, save you money at the same time, reduce environmental impact. I think when you were able to find the happy medium, that is the best place to be. So you are not setting a goal in vacuum right off operations. Sometimes, we need -- we see ourselves needing to have a goal, maybe a little bit -- a little misalignment, there's nothing wrong with it. But what you want to find yourself is to be -- to be at the sweet spot where your operational objective and your environmental -- ESG objective come together. So I would say data metrics are very important and then is to be able to understand the relationship of your environmental desire and your operational desire and bring those 2 things together. So I hope that explains a little bit.

Yes, that makes sense. JJ, what would you say to that as well?

I totally agree that none of this can be done in a vacuum and setting a goal for goal's sake. I might bring it at the level and say, first, start with what is the purpose of your company? Do you have a stated purpose? For us, it is developing technologies that drive human potential. And then what is the vision for your company? And what is your culture? And do you have a culture code or anything like that, that you live by? And then from there, what is your business strategy? And we know strategies get stated and they evolve over a 3- or 5-year period. But if you anchor your social impact or your ESG strategy in purpose, vision, culture and strategy, then you really can't go wrong. Then you have to set goals because you can't manage what you can't measure, and you've got to have the right back-end data and data analytics to inform that. But it's not enough to say, okay, I have a progress, made real agenda for 2030, which is what we call our social impact agenda, but then set annual targets and annual measures against those targets to know are you on track or off track. Then what we have found is we have initiatives within those goals and those annual targets. And sometimes, I have to say there's not enough money or people working on an issue to give it the scale it needs to actually matter. And then you have to say, well, is this strategic and I do it anyway? Or do I retire it and put more money into fewer things to have bigger impact. So for us, one of our transforming lives or our giving goal is around transforming 1 billion lives by 2030, and it's really all about how our technology, our scale and our people can drive lasting and enduring value. Well, there's a whole big debate in that space around, well, how do you measure enduring value. Does anybody care about social return on investment on the top of normal ROI for how a company might invest? And this is all super and mature and continuing to grow and where we have to work together. But we are then looking at all of this data and where we are, and we do quarterly business reviews on ESG, just like we do financial and P&L reviews. And then we're constantly adjusting and having really honest conversations. And I'm sure like a lot of you, a lot of our work in ESG is dispersed across the business, it's disaggregated. It has to be because supply chain and product development are going to drive the sustainability innovations we need, not my team sitting at the corporate center. But we have done a lot in the last year to really focusing on the G, the governance of it all to get it standardized, to ensure we can automate the data we've got because before it was all over the place. And so I mean, I know, Chris, that's a really big answer, but that's how I would approach it in a super high level what I think companies are going through in their maturity curve when it comes to ESG.

Yes. No, really interesting perspectives. And the way both of you speak about it, there are parallels here, just digital transformation, right? It's -- everyone is involved in it, everyone's a stakeholder. There's the governance side of it, there's the mission-setting side of it, and then there's the actual execution bit where you've got to actually pull together the technology, the people, the processes to advance your overall maturity here. I mean, Mark, maybe drawing on your experience of actually having helped companies set up their ESG programs. Now that's something that you had a role in doing for a number of different companies before you joined Adobe. Maybe give some perspectives here then on what's the sort of right way to think about this? What are the different pieces involved? How do you make sure that when you're setting up your -- and maturing your overall program that you're doing so on a sustainable footing that allows you to iteratively mature over time?

Yes. I totally agree with JJ and Edan. Data is super important. Connecting in with the corporate strategy is super important as well. The -- what I've done in terms of helping companies do this in the past in terms of like once you connect in with that corporate strategy is doing a materiality assessment and making sure that you are really clear on what is ESG or CSR or whatever we're going to call it, at that particular company. And so reaching out to your stakeholders and asking them and getting their input on what you should be focusing on, external stakeholders as well as internal stakeholders, blending that in with the sort of corporate culture and then coming up with sort of a framework of these are the issues that are important to our stakeholders. So that you don't get surprised later on because you've missed something. And then sort of using that as a base to create initiatives that have goals and metrics associated with it, getting that buy off by the company and all that, super important process to go through. It's a bit daunting for smaller companies, but really enlightening and helps sort of set a solid foundation that will help things run more smoothly later on if you go through that process.

I would add that we're doing materiality -- ESG materiality much more frequently. So we had done it before we established our 2030 goals, and we just did it again 1.5 years later because so much changed over a short period of time. So it's a great point on materiality.

Yes. Manjit, maybe if I can bring you in here. Again, your experience of having looked across different industries and supporting different organizations with their own sort of ESG assessments, anything specific to glean from those assessments about the role organizations you're expecting their technology supplies to play? I guess another way of asking that question is when you frame the question as that form the basis for those assessments, how much do you bear in mind the role that technology plays in companies evaluating where they are from an ESG point of view?

Well, I'll say that it's become increasingly important. I mean, we've, for example, introduced topics around cyber security, data privacy into the questionnaire, into our various questionnaires. It used to be something that was reserved for a small number of industries where we felt there was the biggest potential risks. And now I think since last year, we basically have it everywhere because, yes -- and I'll focus on cybersecurity and privacy because we see this technology is touching all aspects of these industries. There's a great example of one of the world's largest aluminum producers a few years ago that had their factory shut down for a week because of a hacker attack. Now certainly, the aluminum smelting business was not the industry we would have ranked most highly in terms of risk of cyber attack, but it has materialized. And through that, we see that companies aren't actually doing a great job. So we see that areas like reporting on IT breaches, infrastructure-related incidents, having the right systems around data governance and transparency and things like that. These are issues that are maybe well understood in the technology space, but less understood by other companies. And certainly, I mean, the only way to kind of address those is to partner with the technology companies that are integral kind of in making sure that those systems are robust. So those are just 2 examples of topics that have kind of manifested themselves really only in recent years in kind of places that we probably would have never thought to look before. And I think that shows how connected technology is to all of this.

Yes. Really interesting perspective. And as per sort of the end of my intro at the start of the session, just alluding to the piece of research that we published recently around this whole topic, it was an interesting exercise to have each of the 451 teams give their perspective on this intersection of technology and ESG. And it's certainly our view that there is no part of the information technology landscape that doesn't have to think about this and that doesn't have some responsibility in supporting their customers in sort of maturing their own stance around ESG right from the data center through to policies and technologies that determine the employee experience and the customer experience. So I think we're pretty much out of time. So Edan, Mark, JJ, Manjit, thank you so much for sharing your perspectives, for sharing your ideas. I think we managed to cover quite a lot of ground there. We could have another 5 sessions on different elements of this overall mandate, but really appreciate your time today just to share what each of you are seeing. Thank you very much to each of the 4 of you. Thank you for everybody who's listened into this session, and I think I'm now going to hand back over to Eric. Eric, over to you.

Thank you.

Thank you. Bye.

Thank you.

Thank you, Chris. And thank you to your panelists for a very fascinating discussion about ESG perspective, something I think that we see as critical to not only operating philosophies, but I think as our panelists are pointing out, some of the fundamental guiding principles for organizations. So thank you very much. So this wraps up our morning session. We're now going to go for a 40-minute break. We'll be back at 15 minutes past the hour. We hope that you'll rejoin us then. In the meantime, I'd encourage all of our audience members to make the most of our virtual environment. We've got a networking chat room, if you haven't discovered it already. There are sponsor content hubs that you can visit for more information as well as additional research from the S&P Global and 451 Research teams. So we'll be starting at 15 minutes past. You'll be automatically directed to either the Track 1 or Track 2 sessions, and we hope to see you then. So back at quarter past.