Albemarle Corporation (ALB) Earnings Call Transcript & Summary

Hello, everyone, and thank you for joining us for Albemarle's Second Annual Sustainability Day webcast live from our corporate headquarters here in Charlotte, North Carolina. Albemarle plays an important role in mitigating climate change by enabling the energy transition and supporting clean fuels and the safe and sustainable advancement of electrification and digitalization. Today, you're going to hear from several of our Albemarle leaders on our 2021 progress towards our sustainability strategy and goals. So who are you going to hear from? First, Kent Masters, our CEO, is going to talk to us about our sustainability strategy. Scott Tozier, our CFO, Scott and I had a discussion around our environmental targets and progress. And then Ellen Lenny-Pessagno, Global Vice President of GMCA, and she'll be speaking about that newly structured global government and community affairs team and their efforts. And then finally, Timitra Hildebrand-Jones, Vice President of Culture on our new DI targets and strategy. So following these prerecorded sessions, we've invited several analysts and investors for a live Q&A session. So let's begin with the presentation from our CEO, Kent Masters. Kent?

Albemarle is a leading global developer, manufacturer and marketer of highly engineered specialty chemicals. We combine world-class resources, technological know-how and strong customer partnerships to improve essential aspects of life, such as clean energy, fire safety and sustainable transportation. Our purpose is to make the world safe and sustainable by powering the potential of people. Our values, curiosity, care, courage, humility, integrity, transparency and collaboration reflect our organization's culture and guide our work as we strive for excellence in all that we do. Sustainability is core to our long-term strategy, which consists of 4 key pillars: to grow profitably. We are growing with our strategic customers and building capabilities to accelerate lower capital intensity and higher return projects. To maximize productivity, we optimize earnings, cash flow and cost structure across all our businesses and leverage our operating model to build a strong platform for growth. And to invest with discipline, we generate shareholder value through continued assessment of our portfolio and allocating capital to the highest return opportunities and to advance sustainability. We continue to implement and improve ESG performance across all our businesses and enable our customers' sustainability ambitions. In 2021, we rolled out our operating model, the Albemarle Way of Excellence, or AWE, to ensure enterprise-wide alignment on our business priorities. AWE serves as a blueprint for the way we execute and accelerate our strategy. Our sustainable approach is fully embedded in our operating model, which aligns directly with the materiality assessment that underlies our 2021 sustainability report. Albemarle's sustainable approach includes 3 core areas: first, natural resource management, how we manage our energy consumption, greenhouse gas emissions and other Resource Stewardship, including water and waste. Second, people, workplace and community, our safety performance, DE&I initiatives, investments in talent and stakeholder engagement; and third, sustainable shareholder value, value chain excellence, innovation, business resilience and ethics and regulatory compliance. Our Board of Directors exercises overall governance of our sustainability program. Several Board committees oversee their discrete areas of responsibility for sustainability. The health, safety and environment committee monitors our sustainability initiatives on a quarterly basis. Each of the committee's regular reports to the Board on sustainability matters. 2021 was very much a growth year for Albemarle. With a strong balance sheet and healthy margins, we have the financial flexibility to execute our growth strategy and make significant investments in sustainability. These investments included the completion of a thermal evaporator at our La Negra site in Chile, which allows us to double our lithium production without a corresponding increase in fresh water use. We also made significant organizational changes to support our sustainability strategy and goals. We created key senior level positions, including Albemarle's First Vice President of Global Government and Community Affairs. In 2021, we also created the position of Chief Supply Chain Officer to enable end-to-end supply chain optimization and traceability. Last year, we also began executing our climate strategy, and I'm pleased to report that we are on track to meet or exceed our initial sustainability targets, including to reduce the carbon intensity of our catalyst and bromine businesses by a combined 35% by 2030 to grow our lithium business at a greenhouse gas intensity neutral manner through 2030 and to reduce the intensity of fresh water usage by 25% by 2030 in areas of high and extremely high water risk, namely Chile and Jordan. As we continue to evolve our thinking around sustainability targets, this year, we've also added new targets for diversity, equity and inclusion. First, to increase global gender diversity by a further 1% year-over-year with a particular focus on our manufacturing workforce. Then in the United States, our goal is to increase racial diversity in a senior level management roles by 1% year-over-year. We plan to increase diversity steadily and consistently with the long-term goal of meeting or exceeding global manufacturing benchmarks. At Albemarle, we pride ourselves on creating value for all of our stakeholders. We strive to be stewards of the natural environment. Half of our revenues come from products that enable reduced greenhouse gas emissions or increased resource efficiency, enabling our customers to meet their sustainability goals. For example, our battery-grade lithium products enabled a reduction of greenhouse gas emissions through the adoption of electric vehicles. We realize economic value for our shareholders through strong financial performance, dividend payments and shareholder returns. In 2021, we achieved net sales of $3.3 billion and adjusted EBITDA of $871 million, and we expect significantly higher financial results in 2022. We deliver value to the communities in which we operate by offering our nearly 6,000 employees competitive compensation, benefits and personal and professional growth opportunities. We strive for transparent communication and ongoing dialogue with all our stakeholders, while sharing the benefits of our economic activity to build a positive legacy in the communities in which we operate. Since inception, the Albemarle Foundation has granted over $45 million to strengthen the communities where our employees work and live. We also work to uphold the human rights and the culture of indigenous peoples living near our operations. By making significant investments in our facilities and with our market-leading research and development efforts, we drive innovation to make the world safer, to combat climate change and to create lasting value for our stakeholders.

All right. Kent, it's great to hear from you, especially on the importance of sustainability to our strategy and our corporate culture. And your presentation really helps set the scene for everything we're going to talk about today.

Thanks, Meredith. And thanks to all of you for joining us this morning. I'm so pleased with the great strides our team is making in sustainability and excited to share more today.

All right. Thank you. Next, we had the pleasure to sit down with our Chief Financial Officer, Scott Tozier, to discuss Albemarle's existing environmental targets and how we're tracking towards those goals. So Scott, thank you for being here today to talk about our new sustainability report.

It's great to be here, Meredith.

Thanks. So before we dive into this year's report, I wanted to talk a little bit about the distinct role that Albemarle plays in the transition to a low-carbon economy. So tell us a little bit about what that role is and what it means for Albemarle.

Yes. We're really proud at Albemarle for the way that our products, particularly our lithium products, are supporting the electric vehicle revolution. In 2020, the International Energy Agency did a study. On a well-to-wheel basis, the Global EV fleet enabled the avoidance of greater than 50 million tons of greenhouse gas emissions. And of course, that's growing every year as more electric vehicles are coming to market. As you look at Albemarle's production, 1 kilogram of greenhouse gas emissions from our production of lithium products avoids 50 kilograms of greenhouse gas per year in that transportation fleet. And globally, transportation makes up 25% of the greenhouse gas emissions.

Yes. So it's really important in order for -- to avoid climate change to go into this clean transportation. I know a lot of our employees are excited about that. But at the same time, I think we're all keenly aware that our operations have their own environmental footprint, and we want to make sure we're doing the right thing about that. So to that end, last year, of course, in our sustainability report, we have our new sustainability targets. So tell us, remind us what those targets are. And also, maybe you can tell us a little bit about the progress towards meeting those targets.

Sure, yes. So our targets were set last year for the first time in 2 parts: one is to reduce the carbon intensity of our catalyst and bromine business by 35% by 2030 and to grow our lithium business in a carbon intensity-neutral manner through 2030. And I'm happy to report that we are well on our way to achieving both of these goals. So we -- our goals are set based on Scope 1 and Scope 2 emissions. If you look at our Scope 2 emissions, they're actually down 12% from last year. And most of that is coming from grid greening or the purchase of renewable energy at our Amsterdam plant in the Netherlands and Magnolia, Arkansas in the United States. However, we have opportunities to do that around the world to continue that progress. For Scope 1 emissions, which are emissions from our plants themselves, we have efficiency improvements like heat integration in order to reduce the amount of energy that we need to buy.

All right, great. I think sometimes when I talk to people outside the company, it can be confusing why we have the 2 different greenhouse gas targets. So maybe if you could explain to us why that is.

Sure. So I think a couple of things. One is the bromine and catalyst business are slower growth businesses. Now they're good businesses, GDP-plus type of businesses but they have slower growth rates. And so we've been able to identify projects to achieve absolute reductions to Scope 1 and Scope 2 emissions in line with science-based targets. Lithium, on the other hand, because of its growth profile, it's growing at 20% to 30% per year, makes absolute reductions much more challenging. In fact, it's almost impossible to meet those. Also, we've got to accommodate a product mix shift that's happening with Albemarle's mix. Today, 50% of our product is brine to carbonate-based production and 50% is spodumene hydroxide. As you move forward in time and we continue to grow, we're going to have more and more hydroxide in order to meet the demand for longer-range, higher-powered advanced battery technologies. And as a result, you're going to have more carbon intensity because of the hard rock type production. Ultimately, our brine to carbonate footprint is lower. So as you do that math, the intensity-neutral growth that we're targeting actually equates to a 35% reduction in greenhouse intensity for lithium hydroxide in order to meet that goal.

Yes. So it's really still a pretty tough goal to make and we're excited about that challenge. Now I think another thing that comes up sometimes is people are surprised to hear about how low the environmental footprint is of the brine-based operations. So tell us a little bit more about why that is, why is the brine of a lower environmental footprint.

Yes. Another good question, and I'll talk about 2 parts to this. One is the greenhouse gas or energy intensity but also the water usage. So from an energy perspective, we actually use passive solar energy in order to concentrate those brines in Chile as well as in Nevada. In fact, as you look at the energy usage of the company, nearly 80% of our total energy is actually coming from passive solar. So this is a massive impact, obviously, very clean. From a water perspective, though, we don't use freshwater in our brine extraction or our concentration process. These brines that we're pumping up are 10x saltier than seawater. In fact, they're not usable for human consumption or agriculture or really anything other than what we're using them for. We do a lot of monitoring though because we want to make sure we're not impacting the freshwater that is used by the communities around them. In fact, in Chile, we have over 150 monitoring wells that we monitor on a constant basis. We actually partner with the local communities to record the data. And then that data is actually shared with the regulators in Chile.

Yes, and with the communities, right?

And with the communities as well, that's right. Yes.

And I think we're also helping them to be able to have their own experts so that they have their own view of what that data makes.

You bet. So it's trying to be very transparent with how we're impacting the world.

That's great. Now one of the things that's really exciting about this year's report is, of course, we know a lot more about these environmental footprints because now we've done our first life cycle assessments on the LCAs for the 2 major battery-grade products. So help us understand what the LCAs were and a little bit more about those learnings.

Sure, yes. This is also a very exciting progress for us. And as you may know, life cycle analyses are really doing an analysis of the true impacts of our products from the raw material extraction all the way through to end-of-life processing. Our customers are really asking for this as well. So obviously, we're part of their Scope 3 greenhouse gas emissions. And they're also trying to sell a clean product, right? So electric vehicle is clean, and they want to make sure their supply chain fits that image to the most extent possible. And so did 2 LCAs this year, went and completed those, 1 for rock-based lithium hydroxide at Kemerton and then the second for brine-based carbonate at La Negra. We actually used a third party, part of the Catholic University of Chile, to verify our work and that study will be coming out soon. And then we did these studies in line with ISO standards, so trying to follow all the right processes and rules. The results, Chilean's lithium carbonate global warming potential is about half of the lithium hydroxide from rock.

Right, right. So it's a really important learning for us so that we can go ahead, and now that we have that, we can also work with our supply.

That's right.

So you mentioned that our Scope 1 and Scope 2 are part of our customer Scope 3. But this year, we also have done an initial assessment of our own Scope 3. So talk about that for a bit.

Yes. In fact, I'm most excited about this progress because it gives us a lot more information to be able to work through. And as we've done that work, our 2021 Scope 3 greenhouse gas emissions were 1.7 million tons or about 65% of our overall emissions. That's not really surprising though because these findings are actually very much in line with other specialty chemical companies. You're probably aware but Scope 3 emissions includes 15 categories of emissions. And for Albemarle, the largest contributors to this are our purchased goods so our raw materials, transportation, end-of-life treatment of our product and then joint venture emissions. So those are the biggest contributors. I think it's also interesting that greenhouse gas emissions actually very well correlated to energy use, which has important financial implications as well as strategic implications. So it's going to give us a lot of good information to be able to work with going forward. We'll continue to refine this assessment, work with our customers and suppliers to reduce emissions from both responsible sourcing all the way through the recycling of our end-of-life products.

Yes, that's great. A lot of exciting work to come there. And that team did such a great job because they really adhered closely to the greenhouse gas protocols. So for example, there's no negative emissions there, no avoidance. It's really a true assessment.

That's exactly right.

Great. we talked a lot about greenhouse gas, which is obviously very important, but we don't want to neglect freshwater as well. So last year, we also set our initial targets for freshwater intensity, particularly in Jordan and Chile. So tell us a little bit about -- remind us what that target is, I guess, first and then also the actions here that we're taking.

Well, one of the actions we've taken is that we recently joined over 200 global companies in endorsing the UN Global Compact CEO Water Mandate. So it kind of puts ourselves out there front and center around water usage and obviously underscores our commitment to the management of our freshwater resources. The goal that we set for ourselves in -- last year was to reduce the intensity of freshwater usage by 25% by 2030 in areas of high water risk. And for Albemarle, that is our operations in Chile as well as our bromine operations in Jordan. And I'm happy to report that we are well on track to achieve these goals. And of course, to have just goals, one thing, you need to have actions in order to get there. So a couple of key actions that we've taken so far. In Chile, we've -- as we've been doubling the capacity of that country in terms of producing lithium, we invested in a thermal evaporator that allows us to increase that production while actually reducing our freshwater intensity by 30%. In Jordan, they actually have a portfolio of smaller projects to be able to expand production and improve efficiency. One of those projects actually is converting a waste stream into a saleable product while reducing energy and water usage. So obviously, these and other initiatives are on track to allow us to meet those targets.

Yes. So a lot of really creative work by the teams in Jordan and Chile to get that down. Well, Scott, thank you so much for your time. It was great talking to you today about all the progress we've made for natural resources management at Albemarle. Thank you.

Great. Thanks, Meredith.

All right. Scott, that was a great discussion. Thank you for that. And you mentioned in the presentation about the International Energy Agency and the data regarding total greenhouse gas emissions avoided by the current EV fleet. But how much cleaner really is an EV than a gasoline-powered engine?

That's a great question, Meredith, and 1 that we hear a lot from investors. Over the life of green -- a vehicle, greenhouse gas emissions for EVs are typically lower than for gasoline cars. Emissions vary though based on factors like battery size and how the electricity is generated in order to charge that EV. Argonne National Labs estimated in October of last year, the emissions for an EV with a 300-mile range versus a gasoline car and assuming the expected electricity grid in the U.S. over the life of the vehicle, the EV's greenhouse gas emissions per mile were less than half that of a gasoline vehicle.

Awesome. Thank you, Scott. So now we're going to switch gears and we're going to go to Santiago, Chile, where we spoke with our Global Vice President of Government and Community Affairs, Ellen Lenny-Pessagno.

In 2021, Albemarle formed our new Government and Community Affairs team to develop and implement an enhanced global government and community affairs strategy. Today, it isn't enough to manufacture a quality product. Governments and communities expect us to operate in a sustainable manner to build strong relationships with communities based on dialogue and trust and to have a positive impact where we operate. We had a small but strong government and community affairs team in place. And we've since hired additional subject matter experts globally to proactively engage the governments and communities where we operate to build strong and sustainable relationships. We've shifted from a decentralized approach to a more centralized model so that we can be consistent and proactive in our approach to government and community engagement across all geographies, while still giving our teams on the ground the authority to make the decisions that impact their communities locally. Our license to operate is dependent upon effective and ongoing stakeholder engagement, and we pride ourselves on developing and maintaining relationships built on trust, transparency, respect and open communication. We engage with our host communities with care, honesty and humility. Our government and community affairs team works closely with community leaders to demonstrate respect for the human rights and culture of all peoples, including indigenous peoples, to collaborate on economic development and ensure responsible and ethical mining practices for the industry. We are proud to note that Albemarle is the first lithium company in the world to connect a third-party audit through IRMA, the Initiative for Responsible Mining Assurance, thus becoming the first lithium company to become a full member of IRMA. Our Salar de Atacama site was also the first mining site in Chile to go through the process, and we're doing the same in our 2 lithium sites in Australia. We chose to adopt this standard because it is arguably the most comprehensive and ambitious responsible mining standard globally. NGOs, affected communities, unions, mining companies and purchasers of minerals developed the more than 800 requirements over a 10-year period. IRMA provides the framework to engage in a more meaningful and impactful community engagement by requiring us to dialogue and collaborate with the community in the development of emergency response plans, cultural patrimony conservation, data sharing and transparency, complaint mechanisms and resolution and mine closure plans. I'd like to now share a few examples of Albemarle's community engagement around the world. In Chile, we have cooperative agreements with local indigenous groups, including with the Council of Atacamanian Peoples, which we call the CPA, which represents 18 indigenous communities and 6,000 people that live around the Salar. Under our agreement, we meet with the CPA monthly to discuss community concerns, address changes that need to be made at our operations, cooperate in the protection of the Salar's ecosystems and plan for our monthly visits to jointly monitor water and brine levels. We also contribute 3.5% of our Chilean revenue to the indigenous communities in the CPA. Over the years, these funds have contributed to a variety of projects chosen by the local communities that focus on improving the quality of life of local residents. In 2021, these projects included a new community center in Catarpe a home for every member of the Guatin community, which has permitted indigenous people to return to their ancestral homelands. And the Machuca community utilized their funding to build a lodge for tourists, a photovoltaic plant, a sewage treatment plant and a museum that showcases the cultural heritage and history of the Machuca people. Moving to China. Last year, we donated to local community groups in 3 villages in need. In partnership with our joint venture, JBC in Jordan, our employees worked with the local school built by JBC in 2020 to support STEM and English language learning. Our staff also worked with municipal and regional governments on green neighborhoods in Ghor es-Safi where our operation is located and engaged our employees in cleaning up the shores of the Dead Sea. And in the United States, we continue to work with local education partners to support literacy and learning from kindergarten through college for children from underserved communities. We also support education through the Albemarle Foundation Scholarship program, which was initiated in 2007. Additionally, we support our community outreach councils to distribute grants at some of our international sites through the Albemarle Foundation. The Government and Community Affairs team is also responsible for government advocacy, which includes advocating for Albemarle's interest with legislative and regulatory agencies, leveraging business growth by collaborating with government and external organizations to support sustainable growth initiatives, educating government officials, communities and NGOs on our sustainable operations and finally, collaborating with governments to support their economic and development objectives. For example, last year in Jordan, we advocated for a social entrepreneurship legal structure to enable entrepreneurs where we operate and supported the government's decentralization plan. In addition, Albemarle continuously assesses and monitors potential impacts our products can have on human health and the environment and how we can help control these impacts throughout the value chain. Our global product stewardship team works to ensure the safety of our products when used for their intended purpose. Employees responsible for managing regulatory affairs engage with governments and regulators and monitor evolving regulations not only to maintain compliance but also to prepare for emerging regulations in support of our GBU expansion plans and to bring next-generation products to market. To sum it all up, this growing Government and Community Affairs team is passionate about building trust with stakeholders while supporting our rapidly growing businesses globally.

Thanks, Ellen. It's great to hear how that we're able to dialogue and collaborate with local communities to ensure we have a positive impact in every community where we operate around the world. Ellen is going to be joining us remotely for the Q&A session in just a few moments, and she'll be able to share more with us. Another key highlight for this year's report was our newly set targets for our diversity, equity and inclusion priorities. These targets support our DE&I strategy led by our Vice President of Culture, Timitra Hildebrand-Jones, who we'll hear from next.

At Albemarle, we are committed to building a diverse, equitable and inclusive workplace where everyone feels valued. We know that organizations that have a diverse workforce and inclusive culture are more innovative and are better positioned to attract and retain talent. For a global company like Albemarle, our success depends on our ability to employ people of different genders, ethnicities, sexual orientations, ages and cultural backgrounds. Our aim is to create an inclusive culture by leveraging diverse perspectives, backgrounds, skills and talents to foster a sense of belonging. We actively work to remove systemic barriers and we challenge and respond to bias and discrimination within our workplace. In 2021, we released our DE&I strategic plan. This plan provides a blueprint for measurable actions that will help us integrate diversity, equity and inclusion in our strategic decision-making, enhance organizational effectiveness and meet our future challenges and needs. Through individual and collective responsibility from all employees, we can promote diversity, equity and inclusion as a vital and prominent part of the fabric and culture of Albemarle. The plan relies on our leadership, managers and supervisors in all business units, functions and locations to assume direct responsibility for implementation. In 2021, Albemarle improved global gender diversity to 22%, up from 21% in 2020. In the U.S., we also increased non-white diversity to 24% of the workforce, up from 20% in 2020. We recognize areas of opportunity and are committed to improvement. Therefore, for 2022, our goal is to increase global gender diversity by a further 1% year-over-year, with a particular focus on our manufacturing workforce. In the U.S., we also consider diversity in terms of race or ethnicity. We see room for improvement and increasing diverse talent in our senior level roles. Our goal is to increase racial diversity in senior level management roles by 1% year-over-year. With both targets, we plan to increase diversity steadily and consistently with the long-term goal of meeting or exceeding global manufacturing benchmarks. To accomplish our goals and to build a diverse, equitable and inclusive workplace where everyone feels valued, we have implemented several supporting initiatives. In 2021, we reviewed our hiring and HR processes with a DE&I lens and added DE&I performance goals to our people leaders. Managers are required to present diverse candidate slates and have diverse interview panels for open positions as part of the hiring process. These performance goals and practices help us to be more accountable in bringing diversity into our hiring practices. In 2021, we executed training and education programs through our Albemarle University. Campaigns to complete training modules included topics such as DE&I basics, bias awareness, inclusive leadership and cultural awareness. Additional topics that are available for on-demand access include gender diversity, generational diversity, unconscious bias and Micro-Inequities, the inclusive manager toolkit and inclusive virtual meetings. We will continue to offer training on additional subjects in 2022. We also expanded our employee resource groups, or ERGs, which we call CONNECT Groups, and leverage the groups to drive various initiatives around DE&I throughout the organization. CONNECT Groups such as Pride and Women's CONNECT provide inclusive representation, diversity of thought and global engagement at all levels within the company where every employee's voice is heard. These executive-sponsored employee-led groups are formed to promote a better workplace through shared perspectives and goals that positively impact our employees and their experience aligned with our core values and create and strengthen relationships throughout our global workplace. With the benefit of these ongoing initiatives and increased internal focus, I am confident that we'll reach our goal to create a diverse, equitable and inclusive workplace where everyone's contribution is heard and valued.

Thank you, Timitra. That was an informative look at the new DE&I targets.

Thanks, Meredith. I'm extremely proud of the development and execution of our DE&I strategy over the past year and looking forward to sharing more about DE&I at Albemarle and our new targets.

All right. So with that, let's welcome Ellen Lenny-Pessagno and we're going to open the live portion of the Q&A for today's webcast.

Let's begin with Patrick Linguist from Handelsbanken.

Good to see a set of engaged managers on these issues. I wanted to ask you, obviously, Albemarle has done fantastic improvements from a very high level that I've seen and witnessed over the last 5 years. If we take Atacama, for instance, you advanced your work pretty much across the board. But also, you have neighbors and the industry that have woken up and are actually taking these issues seriously. So how are you looking on sort of basin-wide EIA or at least looking at water and biodiversity impacts on a cooperative basis because, obviously, you have a next-door neighbor who has taken gigantic strides from a, shall we say, a lower level? So there should be an opportunity to communicate and solve or talk about this on a basin-wide level because there are many straws in the milkshake so to speak. So we probably need to get it on a higher level. Can you just talk a bit about that and what your thinking is at.

Yes. So thanks, Patrick. It's an interesting question. And we do have conversations with our neighbors, as you say, in the Salar. We've not kind of joined forces, I would say, to tackle the issue, probably something that we could work for. But we have -- we do have conversations with other lithium producers and other miners that operate around the Salar. And maybe Ellen can give us a little more detail. She's probably closer to the discussions.

Yes. Thank you so much, Kent. So we really firmly believe and agree with you, Patrick, that we have to -- the Salar has to be managed as 1 basin, right? And the environmental impact assessments typically just look at the impact of 1 company. But we are actually working very closely not only with our neighbor but also with the community in really analyzing the impacts of lithium production, of tourism and agribusiness in the Salar basin. And so this is actually a program that's been sponsored by a number of OEMs, along with GIZ, the German quasi public-private consulting company. We've been a leader in that designing that program over the last couple of years and over the last year, and really engaging with community members and identifying what the issues are as well as developing -- we're now in the process of beginning to develop an action plan. Of course, as you know, we use less than 1% of all the freshwater used in the basin. And so we want to be very constructive in how we can support the issue, but it's also very clear that we do not have an impact on freshwater.

Sure. And on the local community discussion, obviously, you've talked about it and you've done a lot of things that are good here. But when it comes to easy reporting is all about also about measuring and setting goals. And these are -- I mean, community support, I mean, to help communities to help themselves. How do you think about this process of setting, measuring and setting goals in this area? You can talk about what we're doing, but sort of a number of people, many of us at least.

Yes, go ahead, Ellen.

Yes. That's a point really well taken, Patrick. I think our work in the Salar is really exemplary. It's sharing 3.5% of our sales is not seen anywhere in the industry. And as you know, we've talked about before, the indigenous communities have self-determination, which is recommended by the UN Declaration of Rights of Indigenous People. And so we do respect that. And I mentioned in my presentation some of the really impactful programs and -- that they have developed. So your point is well taken. We're also looking at how we can share value more broadly across the globe where we operate. And so that's something that we'll incorporate as we build out that program. So I really appreciate that highlight.

Sure. Thanks, guys, for the time and the good work.

Thank you, Patrick, for your time. All right. Next, we're going to go to Diane Essen from Baillie Gifford.

Well, first of all, thank you for letting me take part. At Baillie Gifford, we're really pleased to see that you're adopting the standards from an external stakeholder point of view. It's really great to see. So I was wondering if you could tell us a bit more about your ambitions because there are different levels to this standard. And in particular, what are the milestones that you are going to have to pass in order to reach those goals? I'm thinking you hear a bit about the gap analysis between where you are today and where you want to go.

Yes. So let me just start, and then I'll hand over to Ellen because she's kind of -- she leads the charge for us with respect to IRMA. But I mean, our ambitions are that we for all of our sites around the world that will do this and we'll get those certifications. And we feel like we're a leader in the industry in doing that and kind of setting the stage. But Ellen, maybe you can talk a little bit about the targets and some of the gap assessments that we've done.

Absolutely. Diane, before we talk about numbers, I would talk about impact on our organization. Watching the team in Chile go through this has just been incredibly eye-opening. The team a very passionate about meeting these 800 standards, and it has allowed us to drive real improvements, real improvements in how we engage with the community, real improvements in many, many other areas. And so I participated in the first day of the audit as well as the last day and hearing the team talk about that this was not a check-the-box exercise, that they wanted to move along, as you suggested, move along the scoring of IRMA was just -- it was really wonderful to see. So we -- our initial goals, as you can see, is to get to IRMA transparency, IRMA 50, this is a journey. But we've got our Kings Mountain mine site where we've announced pre-feasibility work. That team there, because we're bringing back a brownfield site, has actually put a goal of getting to IRMA 100, to be the first site globally to get to IRMA 100. That's incredibly aspirational. But I think when you're following a north star like that, you can't go wrong.

Thank you. Sorry, could you be clear but what was that site again that's aiming to get to 100?

Kings Mountain mine site in Kings Mountain, North Carolina. It's still in pre-feasibility study though. But we're using IRMA as our viable for how we approach community and for how we co-create the site along with our community members.

All right. If there's nothing else, we'll go ahead and go to our next question, which I think is going to be David Begleiter from Deutsche. David, are you available?

I am right here. Thank you very much. Thanks again. Kent and Scott, looking at lithium specifically, do we get to a point where there's a premium placed -- a premium price for lower greenhouse gas emission-produced lithium in the marketplace?

So okay, it's an interesting question. And there's a lot of discussion around that, around sustainability and greenhouse gas, water, everything with our customers, particularly the OEMs, and to whether we get to a premium or not, I mean, I think it's going to become a standard in the industry. There'll be some differentiation but that's always the Holy Grail. You want a premium for the work that you do in your pricing and we would aspire to that. But I'm not sure yet when and where that shows up. It's like a lot of a lot of work you do to differentiate yourself. A lot of times, you may or may not get a premium but you get a preference, right? So you're the first supplier, you may be -- you get a higher percentage of the business or your terms are better. But ideally, we want a premium but we'll have to wait and see how that plays out.

Got it. Very helpful. And just going back to Atacama, there's been some obvious reports about the flamingo population being impacted by brine-based production. Can you just address that study and those concerns?

Yes. I think either -- do you want to start and go to Ellen or maybe straight to Ellen?

Yes, I can start and go to Ellen. So yes, we have done a lot of work looking at the surfaces of those lagoons. It is a migratory population so we do count those birds. We have a study that we've done on that. And I know Ellen's been very close to that. Maybe Ellen, you can tell us more about that study.

Yes, happy to do so. It's interesting. There seems to continually be false information that's published about what's going on with Salar. So the studies that we do on these migratory birds is actually voluntary, but we share this information with the community as well as with the government. And our numbers show for the lagoons that are on the south side of our property, is that the numbers are actually increasing. So it's always a bit perplexing to us about how this continual negative information about the Salar is published globally, which in fact, is rarely rooted in fact.

Thank you very much. That's interesting. Thank you again.

Thanks, David.

And we're happy to share more details on that if you're interested.

All right. Great. So moving along our next question, we were going to have with Laurence Alexander from Jefferies. Unfortunately, Laurence had some travel difficulties but we're fortunate enough to have Kevin Espe from Jefferies.

So my first question is to do with M&A. And I guess we want to know when you're screening potential candidates, I guess what other ESG screens do you apply that are new compared to, say, 5 or 10 years ago?

Okay. That's an interesting question. So I guess our process has evolved quite a bit. But Scott, maybe you want to talk a little bit about some of the detailed screens we look at?

Yes, where we are today is we'll use traditional financial analysis to go through the M&A but then we'll apply ESG screens on top of that. And typically, what we're looking at is, does the target company follow the same types of procedures, standards, values that Albemarle has? And if not, do we have a path to be able to get there? As we move forward, we're looking at trying to incorporate concepts like a carbon tax into our financial analysis, but we're not quite there yet. That should be coming shortly.

Okay, great. And just as a follow-up question. So as you look at those sustainability initiatives across the company, I guess, what -- how much CapEx and OpEx are you undertaking that maybe wouldn't have been a part of the plan about 5 years ago? And I guess, are there any efficiency gains or innovations that may not have been a bit of achievable without those system -- without that lens?

Yes. So let me start. Scott can fill in. I think we have a list of projects that we're working through and sustainability helps us prioritize those. So -- but we -- at the moment, we have the opportunity to do projects that are both -- have a good result from a sustainability standpoint and a good financial return. So that's the low-hanging fruit. So we have a list of those. We can see the projects out of some period of time where we'll cross that line. The returns -- financial returns won't be quite as good but the sustainability impact is there, and we'll work our way through that. So I would say it really -- it affects our prioritization but it hasn't really impacted which projects that we take on or don't yet but it will in the future.

Yes. And I would add that this year, we're going to spend somewhere between $100 million to $150 million on projects that will have a sustainability impact. And it's been interesting as we've gotten into this over the past 4 or 5 years, we're finding that many of the projects, the productivity type of projects that our engineers have been working on at our plant, and they're doing it. They started to look at it from a cost perspective. So they wanted to reduce how much energy the plant was using. Well, that has a direct impact as well on the carbon footprint of that particular plant. Same thing with water. So we've got a project in Jordan where they were covering wastewater. And actually, in addition to saving that water for additional uses, they actually came up with a new waste stream that had revenue value to it. So it's interesting how the economics and sustainability impacts start to merge together.

All right. Great. So I have a few more questions that have come on via e-mail. But before I get to that, I'm conscious that we've talked a little bit about our external stakeholders today, but we haven't talked a lot about our internal stakeholders. So I know we just recently did our -- I think, our second recent engagement -- employee engagement survey. I wanted to know maybe if Kent or Timitra wanted to talk a little bit about the outcomes of that survey.

Yes. So we've just recently gotten the results from that survey, I think probably a month ago or so, late April, I think, and Timitra can -- you're closest to it, give us some of the highlights.

Sure. So as Meredith mentioned, we had our first survey in 2019. We completed our engagement survey recently in April and received our results. We had 65% response rate. We would have loved to have 100% but very excited to have all of the employees who took the time to take the survey and share their feedback. We are extremely happy with the engagement score of 76%, which was also our Net Promoter Score. So happy with those results, and we're going through all of the results now to work on our action plans and what we'll focus on going forward.

Thank you. Thanks for that update. Right. So a couple of questions that came in via e-mail. So 1 was, and I do hear this from investors a lot, how do we at Albemarle quantify and differentiate between best in class and other operators and how do we benchmark ourselves against our industry and peers? Because I think from the outside looking in, it's particularly difficult to tell sort of who's really walking the walk, if you will?

Yes. And particularly from a sustainability standpoint. And I think -- so IRMA is really the benchmark that we use for that, and we're trying to lead the way on that and doing the initial assessments and the gap analysis that we talked about. And then you heard the way the team in Chile has been engaged as we've been going through that process really gets people focused on the sustainability aspect of the business. So it's pretty -- it's -- it is interesting to see how the teams have engaged and then we're taking on a new challenge at Kings Mountain with a new mine where we're starting to think that way from the very beginning.

From the beginning, yes.

And Kent, I would add that this year, for the first time ever, we had Pricewaterhouse do a limited assurance audit on our greenhouse gas reporting, so making sure that the processes that we're putting in place are resulting in true fact for us to work with.

Yes. And we'll be adding to that limited assurance over time, additional like the DE&I perhaps as well. Okay. Another question that I received from Joel Jackson at BMO. So Eric, this week presented at the Fast Markets Conference, a lot of you may have seen him there. And he talked about potentially building lithium conversion here in the southeastern United States. So are there any particular environmental hurdles that we're aware of when we look at bringing conversion to the U.S.?

Yes. So I would -- I think, I mean, there will be some challenges around environmental, probably less with the conversion and more so with the mine. So we know we've got all the permitting through that, which we've not completed yet. So the environmental permitting, all the permits for both the mine and the conversion facility. We know where the mine will be, Kings Mountain. We don't know where we'll be with the conversion facility, but it will be somewhere in the southeast U.S. We need to be somewhat close to the mine, close to some ports, close to customers. So it's -- we're going through those processes. I don't know that -- there will be challenges. I don't know that we know exactly what they all are in a geography where we haven't done this before, but I don't think they'll be extraordinary. And the challenge probably will be more with the mine than with conversion. I think if we manage that through the mine, we'll be good from a conversion standpoint.

Yes, that's good.

If I could just add 1 thing. In the southeast, we have a dearth of renewable energy. So it would be wonderful to see developers begin to really build more renewable energy because that's something that our customers are going to ask us to do, particularly for the conversion facility.

Great point. Thank you. All right. Maybe I'll just take 1 final question that we received online. So are there ways that Albemarle is looking at to mine lithium with a limited environmental footprint?

Yes. So let me start with that, and then maybe Ellen can contribute. But I think the way -- I mean, I think we've shown in the life cycle assessments and with the work that we've done around IRMA that we are mining it sustainably and brine is probably the cleanest way to do that. So that -- the footprint is much better for brine than it is for hard rock. And as we grow, we look for additional brine opportunities. That's probably the cleanest way we have of mining lithium today and at the Salar de Atacama, we're probably the poster child for that. Ellen, anything you want to add to that?

Yes. I would just add, we're really driving forward on adopting renewable energy and on continuing to drive best practices, not only ones that we're able to -- that we're aware of but looking at what the industry is doing. And I can't underscore enough our focus on having a positive impact on communities. So we're not only creating high-paying jobs which Kent referenced but also sharing value in the communities where we operate. And I think that is really allowing us to show leadership.

All right. So that concludes our presentation today. Let's now turn it over to Kent for our closing remarks. Kent?

All right. Thank you, and thank you all for joining us on our second annual sustainability day. This year's report emphasizes how advancements in new and existing targets. So in viewing our report, now you know that we are on track to meet our existing targets for greenhouse gas and freshwater intensity, that we concluded our initial Scope 3 greenhouse gas assessments. We've completed the initial life cycle assessments of our lithium products. And we've established new targets for diversity, equity and inclusion, our priorities for that. So we look forward to continuing to hold open and transparent dialogue with you all throughout the year about Albemarle's sustainability journey as we drive sustainability forward. Thanks again, everyone, for joining us today.