e.l.f. Beauty, Inc. (ELF) Earnings Call Transcript & Summary

Good afternoon. Before we begin, we'd like to remind everyone that media and the press are not authorized to be on this call. If you are from the media or the press, please disconnect from the call now. The content presented on this conference call is proprietary to and/or subject to the copyright of Jefferies or third parties. Further as a matter of legal compliance, we remind you that you must not attempt to elicit from any speaker at this event any material nonpublic information or other confidential information, and accordingly, the speaker may decline to respond to any question in his or her sole discretion. You may not publish or otherwise publicly disclose the name of or otherwise identify the speaker’s unless Jefferies has permitted in writing. By attending this event, you agree to all of these restrictions. With that, I'll hand it over to Aniket to begin.

Thank you very much, and greetings, everyone. I hope you're doing well. My name is Aniket Shah and I lead the ESG efforts at Jefferies. Today, you're going to understand and see how ESG really can impact and improve a company's performance and be right at the core of what a company does. And there's no one better to guide that conversation than my colleague, Stephanie Wissink who's hosting today's session and is truly one of the leading voices in the industry around how investors can better analyze the financial importance of ESG purpose and impact when they do financial analysis. I just want to say a couple of things about what we are doing here at Jefferies before I hand it to Steph to introduce the team at e.l.f. and the session today. The first is that you're hearing a lot about sort of the end of ESG in the press these days. And we all have a -- the world sort of jumps, oscillates between enthusiasm and anger very quickly. But what we're going to hear today and what you'll see is that the underlying trends behind ESG sustainability and impact, they're very real, and they're persistent, and they're persistent because they actually make companies better companies. And what -- and we're going to see that in live form in just a few minutes. The second point I want to make around what we're doing at Jefferies and our approach is we want to make this whole ESG and sustainability topic very practical and very real. We're not in the business of ratings and scorings and all of that. We start from the initial premise that ESG issues can impact the company's revenues, they can impact the company's expenses. They can, therefore, impact the company's earnings. They can impact the company's growth rate, they could impact the company's discount rate and therefore, they impact the financial performance of a business. And so what you're going to hear from Steph and those of you who follow her work, you know this that she's just a fantastic analyst who helps her clients understand how that's all evolving and we're going to see that in live form with one of the companies that she covers. So we are delighted to be here with all of you, and Steph, thanks for letting me just say a few words, and I'll hand it over to you now.

All right. Thanks, Aniket. Appreciate the compliments as well. So this is a true treat for all of us today to hear from a company that is not only following industry standards, but actually setting them. And this is something I've known to be true about e.l.f. since the pre-IPO diligence that we did. And Tarang Amin, the company's CEO, is with us today, and he can share a little bit about that journey that the company has been on to really establish a corporate practice around purpose. And again, it's something that we noticed early on about the brand, and it's something that has certainly come to fruition. And it's manifested in today's announcement of a purposeful impact report that the company has put out for all of us to read. Also joining is Scott Milsten, the company's -- excuse me, General Counsel and Chief People Officer and is also the executive sponsor internally for e.l.f's ESG strategy. I think it's really important just to call out that we, on the consumer side, really value Chief People Officer's role in the ESG strategy of a company because people are an extension of the brand, and that couldn't be more true in the beauty industry, where we see a brand extends beyond the product and the people do carry that ethos with them, employees, stakeholders, shareholders and ultimately, brand representatives at the store level. So we do think it's important to talk about the people attribute and it's great to have Scott with us today as well. Also on the line is KC Katten, the company's Head of Investor Relations and Corporate Strategy. And KC has also been very instrumental in how we're thinking on the investor side about applying ESG frameworks to valuing the company and some of the strategic initiatives the company is undertaking to improve its performance. So thank you both for joining me on screen. And I want to turn it over to you Tarang to just begin to level set and bring everybody up to speed on the launch of your impact report and maybe some of the highlights from that and then we'll get into a set of questions.

Great. Well, thank you, Steph and Aniket for hosting this discussion of our first ever impact report. I'm incredibly proud of the entire e.l.f. Beauty team for all the work that's gone into not only the report, but more importantly, the fundamental initiatives behind it in terms of the impact that we're making. Our vision as a company is to be a different kind of beauty company that disrupts industry norms, shapes culture and connects community through positivity, inclusivity and accessibility. And it's very much this DNA of this company, this disruptive roots of this company that is reflected in our impact report. And it's different in 4 different ways. The first way it's different is in the name. It's not an ESG report. It's an impact report. It really highlights the impact that we're making to people, the planet and our furry friends. The second big difference is in the design, this is not a text-heavy document that we've dropped on people. It very much reflects the ethos of our company and our brand, which is to engage our communities and our stakeholders. And so you'll see in our impact report, both visually and verbally a way of bringing to life the key initiatives that we're doing as a company in terms of impact. The third is in design. It's also not a text-heavy report, as I said. But I'd say related to that is also kind of in the length. We also did not bombard people with 100-page memo in terms of what we're doing. We really focused on the key areas of impact that matter to our stakeholders. And then the last is in purpose. And you kind of led with that Steph, but e.l.f. Beauty is a purpose-driven company. And the impact report very much lays out not only our purpose, but the key initiatives of how we're bringing that purpose to life. And so I'm really proud of the report, and I'm looking forward to this discussion and happy to open it up to questions.

Thanks, Tarang. I think it's really important to start with brand because in the consumer industry, we think of brand equity as a key component of stock equity. So I wanted to have you share with us a little bit behind the curtain when you started talking about developing an impact report, how did brand and brand position, brand purpose, brand consciousness fit into that conversation early on.

It's absolutely central. You've often heard me talk about the superpowers we have as a company. This unique combination of having premium quality beauty products at extraordinary values that are vegan, cruelty-free and have broad appeal. And those superpowers has really held this company over the last 18 years, and we continue to build up upon them. And the impact report very much talks about those initiatives related to the brand first and foremost. So a couple of years ago, we acquired a pioneering clean beauty company called W3LL PEOPLE. It was really part of our commitment to Clean Beauty. And while people really accelerate their efforts in clean. In fact, last year, we reformulated over 350 SKUs on the e.l.f. brand to be 100% clean. We avoid over 1,600 different ingredients and really building on those superpowers that our brand is known for, where we added Clean as one of the other superpowers. Recently, we just announced that we're the first beauty company to also be Fair Trade Certified. And this is a pretty major milestone. And for me, it's quite personal. It goes back 15 years ago when I first met Paul Rice, the founder of the Fair Trade USA and was really inspired by what that movement is doing in terms of the well-being of workers and the communities around them. And so we embarked on a journey with Fair Trade to be the first. It's never been done in beauty before, they might have been isolated ingredients, but you never actually certified an entire manufacturing facility. We got that certification. We're certifying the rest of our facilities. And all of this relates back to the brand. These core superpowers are meaningful because they're meaningful to our communities, and they really drive kind of the different type of beauty company we are. And then more importantly, I also hope that they inspire a positive action in others.

That's great. I think one thing I know to be true about e.l.f. is that it busts a lot of myth. And this is one of them and the fact that product that's clean and good for you is more expensive. And that's not the case. You bring tremendous value to your consumer. So I wanted to jump ahead a little bit and talk a little bit about that concept. And when you're communicating with your stakeholder consumer, how important is that to maintain that value proposition, but still advancing along the expectations continuum of what your consumers have for you? And maybe, Scott, if you want to jump in as well, feel free to do so.

Yes. So trying -- I mean I can start off. But I mean, Steph, hugely important. So yes, I mean, absolutely, our sort of some of the hallmark superpowers that we have are integral to our consumer and also integral to our ESG journey, if you will. So we're talking about cruelty-free, vegan and our definition of clean now eliminating over 1,600 ingredients plus another set that we've recently identified. The ability to deliver that proposition at value, we think, is just hugely important to our consumer. And it's also really to the internal team here. I mean, these are things that are just core to the DNA of our people. I mean the cruelty-free sort of stamp and we're now double-cruelty-free certified with both PETA and Leaping Bunny. I mean these are things that our employees are super passionate about, and you'll see that in our community as well.

Yes. And I'll add to that. When you think about our community, we're #1 amongst teams. We have a strong following amongst millennials, even Gen X. And part of what we're always looking at is what's important to that community. So these attributes and core values, as Scott said, are meaningful to that community. And I'd say one of the big differences over time is particularly that younger generation really cares not only about what a product does, but they want to feel good about the company that's backing that product up. And so these values actually are absolutely essential in terms of their choice of what beauty company or what brand are they buying and where -- what do they feel good about in terms of supporting. And so there is -- obviously, we feel great about the overall values, but there's also an impact to the business, which I can talk about a little bit later, too, in terms of where we feel it's essential in terms of the choices consumers make on the brands they pick.

And Tarang, something you mentioned earlier when you were describing your impact report, it does sound like it was designed ultimately for your consumer as well, not just stakeholders and shareholders and investment professionals, but also knowing your audience that they're going to back tech you and part of this was building that back tech process.

Absolutely. And I think that was also -- I talked a little bit earlier in terms of the design. We did not gear our impact report only to ESG professionals or people who follow that. We really geared it towards what do we stand for as a company. And the most important thing we stand for our company is serving our community and that community really does care. So we actually -- we already have it on our website. You can see not only impact report, but you can see all the different initiatives that we're doing. And even on our website, it's one of the most visited portions of our website. So it talks about the importance that consumers place on those values and definitely is geared not only for -- really for all of our stakeholders and probably, I would say, the most important stakeholder we have is the community that we serve.

I want to stay with culture for just a little bit longer because it's so important as we think about ESG beyond initiatives and tactics that it really is embedded and integrated into the culture. So I want to use a few words that you use to describe yourself, for your listeners, thoughtfulness, productivity. I wanted to have you refine those topics a little bit in terms of how does that impact your impact strategy? And maybe both on the people side, but also on the action side, you taking talk and moving it into actions. Talk a little bit about culture.

Yes. So happy to take that one, Steph. And you're right. Those are all sort of hallmarks of sort of e.l.f. culture that we seek to build here, and I used the word passion sort of earlier too. And so we do have an internal community, and we'll call the teammates here that are really interested in sort of setting a new bar in a number of these areas. And this is not -- as you'll see, not a check the box sort of report or exercise, it's very much an action-driven impact report for us. And that's why I think Tarang sort of said that it's the big nuggets. It's the 40 pages, it's a stuff that we are really getting after and our teammates here are -- I have the privilege of being the executive sponsor of an initiative that's grossly oversubscribed, and we have more people that want to work on it than we probably have ability to service. But all of those things are really driving the internal team and the -- and what the impact report does and even the site is, again, it sort of crystallizes and puts all those initiatives in a single spot. And so we can use it as sort of a rallying spot around the company but also with our external stakeholders. And then finally, what I'd say is one thing that's interesting sort of culturally as we think about it is we've seen a lot of -- and we too, I know you said at the beginning of this, we had the introductory, Hey, we're not sort of doing this on grades or US 7.4 or an 89. We similarly are not -- that's not our sort of mode of operation, but we have seen measured improvement with a number of the sort of agencies that look at this without really a ton of operational change. We didn't start to say, oh, we got to get after this scoring. These things -- these practices have long been in place at e.l.f. and in our DNA. We've just memorialized them all in a way to tell our story in a transparent way to our entire community.

Great. I want to give you a little bit of airtime to talk about and maybe brag a little bit about your D&I achievements and strategies because it's one thing, again, during the pre-IPO diligence phase, it really struck us that this is core to the business from an ethos perspective that you believe in it. You want your employee base to represent your customer base, you want your Board and your management team to be diverse. So maybe trying to start with you. Just talk about the importance of that as the steward of the company. And then, Scott, maybe talk us through a little bit about how you execute that on a day-to-day basis.

Sure. So it's -- you're right, Steph. It's absolutely essential to our overall mission. Our mission is to make the best of beauty accessible to every eye, lip, face and skin concern. And so in order to bring that vision to life, we started with our own team. So we're really proud that our employee base is over 75% women, over 40% diverse, over 65% Gen Z and millennials. We wanted to make sure our employee base reflected the consumers that we serve. But it's not just our employees. We're one of, I think, only 26 Boards out of, I think, 4,500 in the U.S. of public companies that have over 40% underrepresented demographics on their Board, over 50% women. And so this goes kind of top all the way through the entire employee base. And then in addition to that, it's also the initiatives we do in terms of our culture of how do we really promote diversity and inclusion. It's striking for me sometimes I see other companies, and we're already at goals that other companies have set for 2025 or 2030. I think Estée Lauder had once they get to gender, equality on their Board by 2025. We're 56% women on our Board. I think Coty would like to roll out DEI training by 2025. Over 90% of our employees have already taken behaviors of inclusion training. And so it's something not only in the people that we have and represent the diversity that we have, but also instilling this culture of inclusivity and really getting the most out of each person.

Maybe just take us one level deeper into that in terms of the processes or feedback loops that you have in place because it sounds like some of this is activated from the top down. But in other cases, it might be surfaced from your employees up to you in terms of opportunities to improve, just share with us just a little bit about that feedback loop without giving away too many secrets.

Yes. No. So we definitely do -- you're right, Steph. It goes both ways. So one of the predicates that we have at e.l.f. and something that I think has served us well over the years is what we have is sort of our one team, one dream philosophy. And so we have our -- we sort of ignore geographies or a subsidiary or what brands you're working on, and we're all one team. And what aligns us in that not only is sort of the cultural fabric that we'll talk about a little bit more here, but even things on total compensation. So for example, we all are on the same bonus plan. We all have equity in e.l.f., every single employee, which I think remains quite unique in the beauty industry. So any time we have sort of a moment to align the team is sort of something that we always take and run with. And we do have feedback loops going both ways. So we still remain a small company. So we get the benefit of when we hold the town hall, which we do twice a month every Friday, we have the anonymous survey that executive team takes it right on that town hall opportunities for improvement. What are you seeing that you like? What are the things seeing that you don't like. And so we do that more formally in a survey, and we may talk about that a little later because we have terrific engagement surveys. But we do have sort of that feedback loop going both ways. And we're welcome -- we welcome those inputs as a company through and through.

And a key part of that feedback loop is also -- we have a high-performance team culture, and we train our employees what is high-performance team culture really mean of really building passionate relationships, encouraging healthy conflict and providing tons of feedback regardless of level and especially to your peers and then mutual accountability. And similar to Scott, we celebrate that every single town hall that we have. We have kind of awards on the specific high-performance team behaviors, different employees can nominate others in terms of the specific actions people are doing. We do facilitated session. So it's a company that thrives on feedback, and it's an important part of the culture. It's very much not top down, but really is shaped by the entire employee base and the feedback that they're providing.

So maybe take a minute or so to talk about that employee survey that you do. It sounds like there's a top survey that happens over a couple of weeks. But do you do a formal annual or biannual make a survey...

We do. Yes. So yes, we do. So we've long done sort of what we'll call pulse checks and informal things. But especially during the pandemic, I think a number of companies e.l.f. no-different sort of how the -- how we touch on people, how are they doing? And some of those early days was a lot of mental health, ability to work, things like that. So for the last couple of years, we have done a formal and benchmark survey where we compare ourselves to peers. And so the headline there, Steph, I'd say, terrific what we call engagement scores and engagement scores have to do with how attached is your organization to you as a company and what you're doing. So things like I'm proud to work for e.l.f. Beauty. We like the vision, we like the transparency of the company. And so right now, we're sitting at an 89% engagement score, which relative to peers is plus 15 points against the peer set that we're benchmarked against, which is obviously something we're super proud of. We sort of always -- we got an offhand comment that we always like to sort of retell the story on is that the person who helped us with the survey when they first saw the results, say, well, we usually only see these with nonprofits, that's sort of attachment and engagement and so forth, like this is like a for-profit score and a nonprofit scoring thing and they really, really pleased. But beyond that sort of headline, every category in which we benchmark, we've exceeded peers. So even those that were sort of the lowest, if we will, we're still plus 7 plus 8 against our peer set or the consumer -- it's a consumer products. It's very broad. It's not just beauty, it's a consumer products peer set. So that's something we're super proud of, and we've done that 2 years running now, and we'll continue to do because you get to see trends and areas to continue to press to leverage strengths.

That's great. All right. We spent a lot of time on the internal. I want to step out of your walls and go into some of your external strategies, including marketing, because this is also something that came up in the pre-IPO diligence. This notion that you take a very different approach to how you represent your brand in marketing in an industry that has a notorious past. We're doing a lot of touch ups, and a lot of rendering that are not necessarily feel. So I wanted to give you a chance to talk a little bit about the stance you've taken in your marketing program and how do you communicate with your customers about living in real life and how you're a solution in that as well?

Sure. So I mean, I think it goes back to the very founding of the company, a digitally native company. In the early days, there wasn't money for marketing. So the real engagement came when people came to elfcosmetics.com. They almost discovered the brand on their own. They could leave a review. The brand was very much created by this community. And so we've taken that community approach where we -- and it's a very democratic view of beauty. It goes back to our fundamental value equation of premium quality, these extraordinary prices. So we've always, I think, bucked the trend, often sometimes in beauty, you have these on the -- noble aspirations of beauty, almost exclusionary in some respects, are from the very first day is how do you engage the community, how do you make this part -- this brand part of their community. And it very much is reflective of how do we engage consumers. So we do not do traditional TV, print advertising or advertising from that standpoint. We tend to figure where -- what's important to our consumers and where do they live? And so it's one of the things that made us a pioneer, for example, on TikTok. We're one of the first beauty companies on TikTok. I think our latest hashtag challenge had over 15 billion views. It was one of the reasons why we went into gaming, one of the first beauty brand to have its own channel on Twitch. And it went very much back into what was important, over 70% of our consumers play video games, over 60% of them watch others play video games. And it was a way of engaging them in a way that was much more meaningful and relevant to them. But not as in how we reach that, it's also what we reach them with. So our channel elfYou on Twitch is 100% on female empowerment. Empowerment is a key part of our purpose pillar. And so we find ways of kind of continuing to innovate on different platforms, different ways that's important for different consumers, even on our brand on brand collaborations, whether we partner with the Chipotle or Dunkin' Donuts or you name it, these are things that are both unexpected and really get the community into the brand, including that feedback loop that we get from them.

Yes, it's really important, I think, to emphasize that because you don't spend as much as your peers on marketing, but the potency of your marketing is incredibly powerful. And it has proven out in the results that you've been putting up. I would complement you, it feels like it's holistic, but it's also effective. I want to also just take a slight detour because you just launched your impact report today and you have a total impact landing space on your website. Maybe just quickly, either one of you, just give us a quick tour of what people would see if they went there. And as -- again, take us behind the curtain as you were designing that landing page, what were the key elements that were really important to signify that this is not just part of lip service, but this is really integrated into the way in which you operate.

Yes, sure. So maybe I'll take a crack at that, Steph. So I'd say sort of 2 main purposes with that site, and then we'll get to the design a little bit. One is just the transparency of telling our story and doing it all in one spot in a way that is sort of navigate and easy to get after. So we launched that site originally in June 2021. And so updated and refreshed this morning with the addition of the impact report itself, but also sort of the 15 policies that sit behind the impact report. So what you'll be able to see there when you go on to the site, is that transparency. The impact report itself, the policies that support it and also sort of the key foundations of what we're getting after in terms of our ESG journey. And the second, and it will probably be dynamic over the years is a spot to be transparent about goal setting and what the future is going to look like. And so we've set some of those in the impact report itself. But we certainly want to have a spot I mean you touched on it earlier, where anyone can go to, whether that's our consumer, whether that's our employees, whether that's external partners, as you know, sort of the partners we work with, the Targets, Ulta's, Walmart's of the world, that's -- this is a key part of their initiative as well. And so this is an e-mail that we're sort of blasting to the entire community, if you will, go to this site and see what's there. And I think it's just -- it's just a spot where I think folks can learn the e.l.f. story in a way that is visually appealing like most of our sort of verbal and visual initiatives to be, and I think it's a great spot for that to happen.

And we did have this on our list, but you actually just used a reference to something that is very considerable in this regard, which is partnership. And you do work with a lot of retailers who are also advancing their standards of their vendor expectations. So maybe spend a little bit of time talking about how those partnership conversations are evolving. And do you find yourself leading those conversations in many regards, just given the progress you've made on some of the initiatives that they're setting goals for e.l.f. So talk a little bit about that.

Well, as Scott said, this is not only important to us, but it's really important to our key retail partners as well. So if I think about Ulta Beauty and their Conscious Beauty program, we're one of the leaders within that program. If you can think about like what we're doing on clean, vegan, cruelty-free, a lot of the core values. If I look at Walmart, Target in terms of what's really important to them, many of these factors are equally important to them. So it actually does aid our conversations in terms of our leadership with them, not only our leadership in terms of penetrating their supply chains of our customers of how we partner to instead of doing price promotions. We're an everyday great value, how we engage consumers with our innovation, our Holy Grail innovation that really brings consumers that previously only had access to prestige products at much higher prices and making that accessible. Those are all key hallmarks of how we engage with each of our customers. but so are many of these other factors as well. So the importance of being vegan, cruelty-free, clean. The Fair Trade -- I've been actually amazed by the number of conversations we had once we announced that we're the first Fair Trade Certified beauty company. Our customers want to know what did that entail? How long was that journey? What did you have to do? How extensive were those audits, will this encourage others to go there? And so people, I think, continue to look to us as leaders in many of these different aspects. And I think it definitely furthers our conversations strategically with each of our customers because these are things that are also important to them. Everyone wants to do better, but in terms of what they're doing from not only a community standpoint, but your impact to the environment and many of the sustainability goals that they also have.

Yes. We talked about that in the session earlier today the idea that as a retailer, you not only have your own corporate ESG objectives, but the fact that you are a conduit for allowing the consumer in the household to reduce their environmental impact and other attributes of what we would consider responsible purchasing, a responsible consumerism. So -- and very much important to kind of tie that to their strategy as well. And I don't want to turn this conversation into a benchmarking exercise of your ESG goals and commitments because we can all read that in your impact report. But I want to ask a slightly different question, which is if you think about the goals that you have laid out and some of the things that you're transparently disclosing now, if we're sitting here in 3 to 5 years, what would you be most proud to have achieved? Maybe a question for each of you. If you think about one of those 15 big pillars, which one do you lead into most is embedding the most pride for you?

Yes. So I'll start on the macro, and I'll let Scott talk about the harder question on what is he going to be most proud of. I feel great that for a company our size, I think we have 309 employees where we're at. Just getting into this compared to some of the services, if I look at Sustainalytics, in our first year of publishing some of these policies, we already have better scores than Coty, Estée Lauder, any of our core peers in our space, which -- just as the first year out of it. So my longer-term goal is not only do we lead the beauty industry, but we also are amongst the most aspirational companies out there. So we always look at different benchmarks, whether it be at Patagonia, another Fair Trade Certified company, whether you look at the F core, a number of people who are really leading in these areas. For me, we always want to make sure e.l.f. is kind of leading the pace, not only in beauty but well beyond beauty would be one of my goals. And what that will require is not any one metric, but really sustained progress against everything that really matters across that entire spectrum. And so that's really very much at least the aspiration that we have is we want e.l.f. to be a real leader in this space, not only for beauty, but well beyond it. Scott, you're mute, I think.

No, that's great. So Steph, I would say sort of on -- with my people hat, I mean I've got such pride in sort of the diversity of our team and the stats we have at the Board level and on the company level and that even translates again into our China -- organization team in China, the demographics that include that team as well. So just -- that's a great sense of pride for me in terms of the people sort of as a father of 2 teenage girls, I have like the passion of this generation on the climate initiatives sort of is something that I think about a ton, and it's probably I would say the sort of the hardest lift for everyone if we all sort of were honest about it, the sort of what are you going to do on E? What are you going to do on E? So I'm excited with where we are in terms of our initial start. But if I was sort of in that 3 to 5 year, I mean I love, so let me stop. Pause there for a second. The Project Unicorn initiative I think, incredible like progress. And a lot of that organically, how do you sort of strip down packaging, 1 million pounds of packaging reduced already is an incredible stat. Some of our commitments on sort of the paper products that we're using are great. But I think the longer journey there is one that -- it's hard, but it excites me a ton, given the passion that it has in our general community right now.

Yes. And then I mean, maybe related to that, because I do think cosmetics is a bit harder than some of the other categories, categories that work really like large liquid fill in a bottle. You can get there earlier with all the componentry, with all the different ingredients, and everything else we have. And so for me, it's part of this journey of starting with vegan, cruelty-free, clean. Clean was a massive commitment for our company, one I feel great about across our entire brand portfolio. If I think of the future for maybe 3 to 5 years out, what right now is kind of table stakes in vegan and cruelty-free, I think in the future it will be clean and sustainable. And then clean, we're already there. We'll continue to make further progress on that front. On sustainability, as Scott said, I think the first part is waste reduction, like get rid of waste. There's so much, so much, I wouldn't call it noise, but so much made out of like PCR and other pieces there. And for me, at the end of the day, it's like it's an impact report, very intentional, the name for it is, what's the biggest impact we can make. And so when I look at carbon emissions, if I look at other impacts to the environment, really taking a more holistic view that it's not just whatever is most un-vogue in terms of the particular ingredient, but how do we reduce that impact? And how do we propel kind of the quality of our products and this incredible value. So that combination is, I think, one of the things I'm most excited about. It's the E part of it is the hardest part of that journey in some respects from where we're started because we do so well on the S and G portions. I would say, but even there, I can definitely see a vision of not only continuing to reduce more packaging materials but reduce our impact and really add to that overall superpowers that we talked about and particularly with the quality of our products and the value.

And maybe just to bring a little of practicality for that. Did the 2 of you do you have updates, benchmarking tools or things that you use internally to measure progress on some of the impact areas that maybe how frequently just give us a little bit of a peek into the dashboards that you both use to reinforce some of the progress.

Yes. So Steph, sorry I got a little choppy there. I think you're asking about sort of frequency and meeting of goals and things. So yes, we do have a cross-functional team on this, and we meet regularly, including with our Nominating and Governance Committee. And Remember, we're fortunate to have a terrifically accomplished Board generally, but we also have a true ESG expert in Lori Keith, on our Nominating and Governance Committee. So we get a lot of inputs from that committee in terms of goals, goal setting, what are other people doing and what should we get after. And yes, so we do have benchmarks for our initiatives. A lot right now, again, in sort of the sustainability area are ones that we're focused on and focused on developing as we've sort of set some baselines and now we're working to set those goals a little bit more broadly.

Yes. And then in terms of dashboards, I think a few of the things that we've looked at. We did our first materiality assessment to really figure out what's most meaningful to our key stakeholders, and that's what we pay greatest attention to. Like what is -- has the greatest importance, what's most meaningful. And so that helps prioritize the different factors we look at. Second, across every one of these core areas, we have important benchmarks, whether we -- whether we talk about our diversity efforts, our culture, the engagement we talked about, whether we talk about kind of our waste reduction, some of the different areas that we're looking at there and setting goals. So we have a number of different benchmarks, but similar to Scott, I really -- this is not something that is just an initiative at the executive committee, our Board is fully involved. And Lori Keith is one of the key leaders in the ESG space, has been hugely instrumental and helpful to us in terms of really helping guide kind of what some of those goals should be, the approach should be, and the overall Board is highly engaged as well. And we share that at every Board meeting. Scott will actually start in the governance section in terms of our progress on ESG and impact and what that means. So it's something that I would say, goes well beyond even just our management team all the way through in the stewardship of our Board as well.

And Tarang, something that you said just reminded me, too, that the strategies around ESG and impact will far outlive your own tenure as leaders. And so maybe just, again, a little bit of a sneak peek into your own philosophy around this. But how do you think about planting seeds versus seeing things through the goal-setting element versus really establishing long-term 25-plus year transformational initiatives in the organization. Maybe just share with us a little bit about from a leadership philosophy perspective.

Yes. So I'd say our leadership philosophy really comes from what Scott talked about one team, one dream. So while we can set strategy kind of at the top level, it's really informed by all of our employees and the communities that we serve. And so as I think about transformational, what makes us really stick is this is not some corporate initiative that we're pushing down the organization. But as Scott said, we have more people who want to volunteer to be part of kind of our overall impact program than we actually have seats or way of managing through. So it's the values that each of our employees and the communities have and then also being led by our community, what's important, if we went back 10 years ago, vegan and cruelty-free, is not nearly the level of importance as it is today. Even 5 years ago, clean and sustainable is not really there. So I think it's part of the real power of this as I think about much longer arc is creating a company that is not afraid to continue to innovate, not afraid to continue to be curious on the consumer and what's important to them and actually follow that lead. And so some of the most passionate advocates we have within the company are some of our very youngest employees who -- this is something so core to who they are. And that's I think one of the things that's really driven the company over time is this ability to continually evolve the team and our approach, very much in the mindset of what's serving consumer into the future. And it's a lot of what where we innovate and pioneer is with that lens. So the great thing for me is I don't even bother thinking about what's going to be 25 years from now because the world is evolving so fast. I'm almost thinking more in terms of that 5-year increment. So the initiatives we have on clean and sustainable as I can tell you, 5 years from now, that's going to be more important than it is today, and it's pretty important today. And as we continue to go Fair Trade was one of those things that was a long-term commitment of not only improving the lives of our communities, but also the workers who make our products and their communities and a big part of Fair Trade is there is a premium that you pay on Fair Trade Certified products that the workers get to decide what they want to do to improve their communities, whether it be education, health care, a number of other core initiatives that we feel the better engaged not only our employees, but the partners we deal with in our community, the better we're going to be able to continue to lead in our space. And so I think -- but maybe Scott will have a better answer to that one.

No, that's a good one Tarang, I mean, I think, Steph, even to think about -- so there's -- so I do have a little sort of like get up to the cliff on sort of a 20-year goal, and I'm like I don't think that -- I just -- that's sort of not where we are, I think, just sort of in our ESG journey. But a lot of times, too, where you're sort of a first mover like the Fair Trade Certified factory, that's a first mover, that's taking something that's been around and moving into a new industry. So would we have gotten that quote right to say that was going to take a couple of years, don't know, but we want to do the work on being that first mover and make sure we find those areas that are most impactful, I would say, regardless of time line, right? And that's one -- that's a perfect example, one that's early in our learning.

Yes. And the last thing I'd say. I'll take it back to the superpowers I talked about earlier. A little bit of what is in my head is if you can offer the consumer something where they don't have to trade off, like when I look at our superpowers and I say we have premium quality at these extraordinary prices that's vegan, cruelty-free, clean, broadly appealing and sustainable over time and Fair Trade Certified. You sit there and you go like, well, why wouldn't you pick this brand over another brand. And so I think that's our longer-term kind of moat is kind of creating this -- and it takes a lot of work because even in that being able to get that quality with the value and then having all these other attributes at the value equation that we do is I think that the piece that gives me the greatest confidence long term in terms of always leading with what's important to the community and making sure we have it. And while somebody else might be able to go get a decent price point or somebody else might be able to be cruelty-free, it's a unique combination of these core attributes that I think is the piece that gives me the greatest confidence long term. And they'll continue to evolve, and you'll continue to see more superpowers being added in terms of what our company offers.

That's great. All right. Final thought is more of an ask of the industry and your peer set. What would you like to see the industry overall collectively come together around to work together to find bigger solutions faster?

Yes. Well, I would say, following many of the practices we have, I mean I can't tell you how many times I've been in the consumer space for 30 years, where I've heard the excuses on even at the Board level, the available talent on represented, underrepresented groups. And I was like, we squash out myth within even getting to the IPO, which -- and I'd love to tell you it's hard, but it wasn't that hard. It was just like this intentionality of going and doing. So instead of talking about DEI, just do it, it's not that hard, like keep making positive progress as we go through. Similarly, in terms of these other things, while I can't be cruelty-free and have premium products and have a great value. It's like, no, we're actually already doing it. The one that I would be probably I'd say the most passionate about is encouraging others on the Fair Trade portion as well because I think that's one where, yes, it took us a couple of years because we're the first in pioneering a new space, but now we've done it, we're happy to talk to any other company of how do you go about it? How do you drive because we can see that impact? And just being able to go through the 130 different criteria they look at when it comes to the well-being of workers and the environment and everything else they do. I think would set people off really well. So I would say that would be one where I'd say we've already shown that it's possible. We can do it and it leads to a broader ethos of companies that are Fair Trade Certified in terms of some of the things you believe in. I think that would be one that would be one where I kind of encourage the industry. One, follow the stuff we're already doing, but two, I think that's one where you could actually make, I think, global beauty and personal care is a $550 billion industry. So you think like the impact you could make to millions of people if you got those practices right, is one that as a person I'm very passionate about.

Yes. And for me, I think it is on the diversity and inclusion the people had on. I mean I think as Tarang said, we've been intentional about it. And if you're intentional about finding great talent that is from an underrepresented group, you find great talent from an underrepresented group. So it's something that I think that we are certainly a leader in and love to see. I don't know, to get to that point where it's not headline-making anymore, it just sort of is, and we'd love to be a leader that helps bring the industry to that point.

Right. I want to first thank you both for having open and candid conversations with us, but I also want to compliment you because I think there's something to be said for a small company that's a disruptor in the space has a DNA of being a disruptor and a myth-buster. So really taking a lead in some of these areas. And we're going to now be looking to you as setting the benchmark for others to follow. But I also want to just compliment you personally because I can tell both -- for both of you, this is a personal passion, and that's something that on the investment side that we don't -- I don't think we assess as well as we probably could. How much internal belief is there from the leadership team in these important initiatives. And it's certainly clear from both of you that these are both professional and personal initiatives. So thank you for being open with us about that. Go ahead.

No, I was going to say thank you. You've been a real leader in this space. Aniket said it as well, but often, I actually learned a lot just by reading some of your reports on what else we should do.

Absolutely.

I appreciate that. And if you have any questions for the e.l.f. team, please reach out to us. We're happy to put you in touch with them. And as I mentioned earlier, KC Katten leads the company's Investor Relations effort, and we'll be happy to follow up. And I think the course of action for all of us is to go take a look at that impact report. It's a great report. There's a lot packed in there, but it's also very digestible. So kudos to you, Tarang and the team for putting together something that's easy for us to take in and assembling it for us to put it all in one place. So much appreciated. Thank you, everyone, for joining, and have a great afternoon. Take care.

Thank you.