Hewlett Packard Enterprise Company (HPE) Earnings Call Transcript & Summary

I'm joined by Morgan Stanley's U.S. ESG analyst, Mark Carlucci. Together, we're pleased to host Hewlett Packard Enterprise CEO, Antonio Neri; and Chief Sustainability Officer, Brian Tippens, for a discussion on the company's recently published Living Progress Report, which highlights HPE's approach, programs and progress toward ESG initiatives. This is a really important topic because we've seen a marked increase in investor interest in ESG over the past year. And HPE has been on the forefront of integrating these principles into its business strategy, underscored by Antonio's participation alongside Brian today. Antonio will start out by highlighting HPE's approach to ESG, and then Brian will address HPE's performance towards ESG goals. And then Mark and I will moderate questions. [Operator Instructions] Before we begin, please note that Morgan Stanley disclosures can be found at www.morganstanley.com/researchdisclosures. If you have any questions, please reach out to Morgan Stanley sales representative. For HPE's disclosures, please refer to Slide 3 and reach out to HPE IR for more details. With that, Antonio and Brian, thank you so much for spending the time with us today. Let me turn it over to you, and then we'll take some questions. Antonio?

Yes. Thank you, and good morning, everyone, or good afternoon, wherever you are around the globe. Katy and Mark, thank you for hosting us today. We appreciate you giving the opportunity to share with investors and prospective investors the opportunity to share that strategy that we're driving, which obviously, ESG is an integral component of what we do. I have been now the CEO for 3.5 years, and I've been always focused on a purpose-driven mission. And that's why HPE is being -- is committed to being a force for good using the technology to advance the way people live and work. That's our purpose statement. That's what guide us every single day. And obviously, the last few months and maybe now 1.5 years have reinforced the commitment. We actually publish what we call a Living Progress Report, which is now maybe 6 weeks on our website. But ultimately, it shows how our HPE strategy is creating sustainable and equitable IT solutions to meet the technology demands of the future. And again, the last 15, 16 months have shown that now is more important than ever. Obviously, in that, our commitment to environmental, social and governance leadership extend to and integrate into as well in many aspects of our, not just our strategy, but our operations. And actually, I truly believe, enhance the HPE's competitiveness and also makes us way more resilient and also drives those relationships with all stakeholders in many, many different ways. So as I engage with investors, the topic comes up all the time. And then we talk about what are risks in top of mind that currently gets elevated. And the pandemic obviously has highlighted many of those. But also, we have seen companies with strong ESG performance. Our performance is very, very strong. And you will see from Brian, how we hold ourself accountable. This is not just an intent. It's not just to put it in a mission statement. It's not just to elaborate a few thoughts on our strategy page that really drive a set of KPIs that makes us accountable to what we do. And so obviously, in the last year or so, there has been a shift towards ESG integration. And I think HPE has been the leader or one of the leaders in this front. And what we'd like to do today is show you a little bit how we're doing that. And that's why this first page, right, that you see on the webcast is very, very straightforward. Our kind of constitution, call it, what is our purpose, the ones the way people limit work. Our mission is to create, again, sustainable and equitable IT solutions that meet the technology demands of the future. How we create solutions that are not only future ready, but do it with sustainability and equity in mind. And then what are the key areas of focus? Obviously, low carbon emission, low carbon economy. We not only commit to certain goals that we drive, and Brian will show you some of those key metrics. But we have a very important role, which is to design these technologies for everyone to take advantage of that innovation. Obviously, inclusion of diversity is top of mind for me and my executive team. While we have made great progress, there is still an incredible amount of work to done. But it's all about investing in people. Yes, technology is a key component of what we do. We are a technology company. I'm an engineer by trade. But ultimately, people make the difference. And then the one thing I'm super proud is operating with integrity. We win only the right way. That's a fundamental message here. And that's something that we drive every single day. So if you go to the next slide, obviously, we are living in a digital economy. That digital economy is powering now the new world and is at the core of this is the digital transformation. And that digital transformation is not only the critical backbone of our modern enterprise, but also the need to really digitize and extract every possible value of the data. To give a sense, we are generating data at the pace we had never seen before. In fact, we -- by our own calculation, we believe in the next 2 years, we're going to generate more data than we ever created in human history. But that data has value. The question is how we extract the sites from the data faster and we do it in a sustainable way. And the pandemic, obviously, reaffirmed the need to go faster on the digital transformation, whether it was ordering food from your home or doing everything online, that become now a critical and imperative priority for all our customers and obviously, every enterprise. As we transition to making our offer as a service, if you have read some of my commitments over the years, the first year, I said the edge is the next big frontier. The edge is where we live and work. Here we are. We are doing a Zoom call today. But the fact is that the data is being created mostly at the edge. And we see the cloud not just as a destination but an experience that go from the edge to the big cloud. But in 2019, I said that we're going to offer everything that we do in our company as a service. And as we pivot to as a service, actually, we are delivering sustainable digital transformation because everything you consume as a service is more sustainable because you're not wasting CapEx, you're now wasting infrastructure. You consume exactly what you need. And so we see a tremendous opportunity not only to help our customers transform and digitize while advancing their own sustainable business agendas. In fact, a few of the last deals in Q2 that we announced with HPE GreenLake, which is our offer as a service, were won because we were able to deliver sustainable solutions to them. And we also see, obviously, the delivery model is changing quite rapidly. And as we think about some of the impact that it has, obviously, climate is a big topic today. And we, as a company, have signed to that agreement and we have made certain commitments that we're going to deliver over the next few years. But in the end, what customers are asking is a solution to help address not only the business outcomes they need to deliver, but the environmental footprint, including improving efficiency, measurement, real measurement, carbon impact not by buying credits, but really deliver the true performance-oriented solutions and then the minimization of energy and use in materials. And so today, actually, when you look at the global consumption of energy, almost 20% of the total energy consumption goes to power these mega cloud data centers. And if you follow the curve of data and compute needs, you see that's not sustainable. So when we think about how we're going to deploy these solutions in a sustainable way, at the same time, we are thinking how we're going to radically change those compute architectures. And we, with our company with HPE Labs and our R&D teams, have an amazing set of innovations that we're going to deploy over the next 2 years whether it's in AI and machine learning in a memory-driven approach or later on in the commercial space as we're able to scale those solutions of cost and size down for the traditional enterprise. But ultimately, through HPE GreenLake, we are actually we call on the dispelling the notion that sustainable items be located in the public cloud. We don't believe that at all. We believe, actually, the cloud will be distributed everywhere. Think about an autonomous car. Think about manufacturing. Think about health care. We today actually help some of the very interesting companies that ultimately are embedded in computing where the data is created and do it in a sustainable way. And then also, the traditional on-premises models are becoming now very important because the world is hybrid. You have applications and data everywhere across your enterprise. But ultimately, how we ensure we utilize every possible bit of resource without wasting energy. And that's why we bring all what we do as a company under the offer which we call HPE GreenLake, which is our edge to cloud platform. It's a platform offering that customers can consume as a service. And we built into that also the financial models. And then also, we drive what we call the circular economy because over a period of time, those assets eventually depreciate in value. But we take those assets and we life cycle manage them and we find new lives for them as we go along and then we create what we call the circular economy. In fact, Today, we can prove we can recover 99.5% at the value of the assets not only by finding a new home, but also a recycling aspect of this. And we help reduce what we call the trillions of e-waste that gets generated every single day. So we go to the next page. We do this not just at the operational level. We do this at the governance level. And our Board, one of the things I'm really proud of as a board is one of the most diverse board in corporate America. We have 12 directors, including myself, 5 are females and 1 is African American. And then I'm amazed of not just diversity of gender and ethnicity, but at the same time, experiences. And we drive that through the oversight with our Governance Social Responsibility Committee that obviously, when we think about this, what are the things that the Board needs to be engaged and how we build the key components into our strategy. And -- but ultimately, the Board is actively engaged in providing oversight for the ESG issues, including inclusion and diversity, risk management and so forth. And all our Board members go through the same training everybody goes inside the company, right? So because when they engage our shareholders, obviously, it's important they can speak from but also clearly articulate what our commitment's going forward. And we have regular, obviously, meetings and one on ones that I drive with each of them. So this is a very important aspect, but I hope you get the sense it's not just a mission. It is what we do from the strategy perspective and what we do as well from the corporate governance perspective. And last year, obviously, we saw not just the pandemic challenge, but also we saw the social injustice, hatred that we all saw and lived. And obviously, the topic about inclusion diversity came permanent. And I led an initiative with one of our Board members, Pam Carter, which is the sponsor. She as one of the board member, have been a number of years in the board. She's African American, and she has held multiple leadership positions throughout her career, including being the Attorney General for Indiana State, but -- and several directors part of that journey. But together with Brian and others, we have established what we call an Inclusion Diversity Council, which is composed by employees, employees across the company where we drive a set of initiatives to improve and accelerate our efforts around inclusion diversity. At the same time, we have multiple directors engaged in developing our talent, what we call the ReadyNow program, which was led by Maggie [indiscernible] again, another season board member in our Board where we highlight unique female talent that we want to develop, and we walk them through a program that make them ready to join other boards. And that's an opportunity not only to highlight our brand but talent, retain that talent, but also make sure that HPE is being understood in the marketplace. So that's what we do from the Board oversight and unique set of programs and obviously, the other committee, right? The committee has a unique function that ultimately is actively engaged around management and execution, which is aligned to all the filings that we do. In the last slide, you can see here is how we do this from a structural perspective, we have the Board of Directors, the HPE Executive Council is my direct reports. We leverage both the external stakeholders as well as our foundation, which obviously is core to the values of the company and the brand that we have done for decades, now 83 years. And then we drive that through the Living Progress Strategy Council. Brian is going to talk to me more about this. But you can see what functions and entities across the company are engaged. We are now 7 months, maybe a little bit less hopefully to open our new headquarters here in Houston, Texas. That's going to be all powered by renewable energy. It's going to be a state-of-the-art digital site where we can showcase what we do from the ESG perspective in a living campus, if you will. But ultimately, we want to show you the progress we have made against our commitment. So what I would like to do now is pass it over to Brian to walk you through more about those metrics. And I will leave you with the top. What I'm really proud of is the work we did through the pandemic, which is responding to the COVID-19 crisis. And we have done some amazing things, but ultimately shows the character, the resilience and the values of the company. The use cases that we engage, whether it's put in WiFi Aruba access points in the parking lots for kids to come through drive-through because believe or not, in this country, we don't have pervasive connectivity yet. And the digital divide is quite significant. You will imagine in countries like United States, that would not be the case. But it actually is the case. I'm personally engaged with the world economic architectures who think about the next set of policies, particularly with the public sector, how we make sure this digital economy does not create a digital divide. But we have retrofitted cruise ships. We have established compute and cloud solution to hospitals. It's just amazing what has been done. And that's something that as a CEO I'm incredibly proud because I represent 60,000 employees that make a difference every single day. So with that, Brian, I'm going to pass it over to you so you can talk about the progress we have made so far.

Sure. Thank you for that, Antonio, and thank you to Katy and Mark for hosting us in this opportunity to share some of the highlights of our Living Progress Report on our ESG strategy. Antonio talked a lot about this global I&D Executive Council, which is very core to delivering a lot of our ESG performance in the area of human capital. And you see from the slide there, the makeup of that council and some of the areas of focus. But I want to advance and just speak a little bit to the performance. So with the foundation that Antonio laid on our commitment to environmental social governance, our commitment to Living Progress, some of what drives us from a governance standpoint, I want to dive a little bit deeper into some of the key accomplishments and the metrics and the measures that we report in this year's report. Starting with an overview of how we drive sustainable digital transformation. So we believe that this global transition to a low carbon and more circular economy, as Antonio mentioned, represents a real business opportunity for HPE and that we are well positioned to capitalize on market opportunities associated with that transition through offering energy-efficient solutions and transformative technologies. And given that growing demand for IT hardware and service offerings, exacerbated by the pandemic, the current environment, managing energy and resource use associated with IT infrastructure is critical to enabling enterprises to scale. So a few key points that you'll see more about in the report. First, we're unique in the manner in which we're able to engage with customers on sustainable IT. As Antonio mentioned, many of our most recent wins were in some ways attributed to our ability to meet sustainability needs of our customers. And so we've stood up a practice to directly brief customers on how our solutions can drive their business and sustainability objectives. We estimate that these engagements helped drive approximately $847 million in net revenues in 2020, which was a significant increase of 44% over the previous year. As Antonio talked about our pivot to as a service is also driving efficiencies for our customers. Another data point on our GreenLake offering's, they offer us efficient hardware and solutions configured to, as Antonio mentioned, on average, reduced customer inefficiencies by 30% compared to traditional capital expenditure models. So that's a key accomplishment we talked about in the report. And then we talked about the circular economy. We really work to raise the bar and pushing the scope of our asset management programs to include products from other brands that aren't made by HPE, which is a rare practice and industry, we refurbish both our customers and our own retired IT equipment through our 2 state-of-the-art technology renewal centers, what we call our TRCs, which are the largest of their kind in the world. And of the more than 3 million assets returned to our TRCs in 2020. 87% were given new life, and only 11% were sent to recycling. And not only do we quantify the carbon, the energy, the waste landfill savings of these activities for our customers, but those process assets are also remarketed to yield profit for HPE and returned capital back to our customers. And so we're proud of the accomplishments and what we're able to achieve through that focus on circular economy. On the next slide, we'll talk a little bit about our net-zero ambition. So to accelerate our net-zero future, we know that we have to decouple business growth from our greenhouse gas emissions and the consumption of raw materials. And although the majority of HPE impacts result from customer use of our products, we have set science-based targets across our entire value chain to reduce climate impacts. As of 2020, as we think about that map to that road towards 2050. And as of 2020, we've already reduced the carbon intensity of our business by more than 50% against a 2016 baseline. We achieved 2 of our client-based climate targets out of schedule, first, reducing our operational emissions by 62% against that 2016 baseline and our absolute manufacturing-related emissions by 15% against 2016 levels. And in the coming year, we're going to set new targets for the future that will keep us on a path towards complete carbon neutrality by 2050. And we continue to partner with our suppliers to help increase their own performance. 80% of our production suppliers have set or committed to set within 2 years their own science-based emissions reduction targets. And we publicly report our supplier progress towards those goals and SCR performance. Social environmental responsibility performance is factored into our HPE procurement decisions through our supplier business scorecard. And so you see we focus on our own operations, but also in the operations of our suppliers, taking that whole value chain approach. We were the first IT -- among one of the first IT companies to disclose risks and opportunities in alignment with the recommendations of TCFD, the Task Force on Climate-related Financial Disclosures, and we support the advancement of corporate reporting on climate as a material risk. So we believe that the global transition to a low carbon and circular economy presents a business opportunity and we're very well positioned to capitalize on them. The next slide, we talk a little bit about our approach to human capital and how we're tackling human capital challenges related to our workforce. And Antonio spoke to some of these, and it's an area where we've always been laser-focused, but even more so given that pandemic, the racial unrest of the last year. The current environment, it's an area we spend a lot of time focusing on. We've overcome some past human capital challenges by investing in employee development and competitive benefit offerings, and we've seen some good results from this. We've seen the results of some record high employee engagement scores and declining turnover rates that are well below the industry norm. We're always in a petite talent right around -- and our offerings around benefits are an enabler to help us retain the best and brightest talent. In terms of inclusion and diversity, which has also been a key area of focus for us, we've made some key advancements over the last year. Our report -- this year's Living Progress Report includes an enhanced level of disclosure and transparency around the makeup of the talent life -- the talent life cycle of our workforce in the U.S. in terms of ethnicity and gender and by job category. We've always been very transparent about our workforce demographics in terms of diversity, but have increased the level of transparency. And we note that in 2020, we were able to increase female representation at every level worldwide, including, importantly, in our industry in technical and executive roles. We performed above industry peers in gender and most U.S. ethnicities. As Antonio mentioned, this is an area where we're never satisfied and we know we've always got work to do. We've made some advancement, but we know we particularly have more work to do around Hispanic, Latin's, Black African-American representation. But we've made significant investments, including the formation of that council, which is already yielding results to help improve and move the needle there. In terms of human rights, we think beyond the 4 walls of HPE. We've had this long-held focus on human rights, which extends across our value chain. I'm proud to share that for the third year in a row, we were named among the world's most ethical companies by Ethisphere Institute. And also earlier this year, just a few months ago, we received the Thomson Reuters Foundation stops laboring enterprise award for our leadership in limiting the risk of laboring our supply chain. So we're thinking across the entire value chain in terms of human capital and impacting our communities. Specific to our communities, I'm proud to have recently been appointed to lead the HPE Foundation as President of our Foundation of 501(c)3. And we had a record-breaking year in which HPE donated over $40 million to philanthropic costs across the globe, everywhere where employees live and work, including importantly, over the last year, a number of efforts to combat COVID-19 and to mitigate impacts to communities underserved around the world. And so looking into the next year, as we look about and think about the impacts our foundation can make, we plan to further align our foundation with our business practices, particularly to support our inclusion and diversity strategy. On the next slide, a little bit more about the Board. Antonio talked about the level of engagement and oversight and governance from our board and the extent to which each of our Board members get very involved in driving our ESG strategy. Our Board has a phenomenal set of diverse skills and experiences, and they align very well with our business strategy and contribute to the effective oversight for HPE. Going beyond our diversity in terms of skills and experience, we pride ourselves in the fact that over half of our Board, Antonio will reference, is women or ethnically diverse. In fact, 54% of our Board is diverse in terms of gender or ethnicity. And our CSR committee, our nominating Governance and Social Responsibility Committee consults with the chair and assesses regularly the appropriate size of the Board as well as the alignment of directors' skill sets with the evolving company strategy and whether any of the vacancies on the Board are expected due to retirement or otherwise. Or whether the board would benefit from the addition of a director with a specific skill set. And we definitely look to our Board to actively engage on all areas of ESG providing oversight, but getting directly involved, as Antonio references Pam Carter does with our I&D committee very visibly to our team members around the globe, setting the tone at the top on helping to drive our ESG strategy. And in closing, I'll just reference some of the key wins that we're proud of to leave you with a reminder of our leadership in this space. We all aim to be fully transparent in meeting investor requests for ESG information. And we recognize that since investors detailed information specifications differ, we have prioritized ratings, those ESG ratings and ranking agencies that influence the largest investment and are most respected in their field. We look at the wide breadth of different ratings and rankings and focus on those that we feel have the biggest impact and the biggest interest to our investors. And when you look at those, we consistently rank as an industry leader in these prominent investor and customer-facing ratings or rankings. And you see a few examples there. We've been named an industry leader on the S&P Dow Jones Sustainability Index for 2 consecutive years. We've placed tie on the carbon -- the CDP Climate A list for 8 consecutive years. And we hold a leader position with AA rating from MSCI ESG. And our performance on these ratings is really a testament to our transparency, our disclosure, our rigorous standards and very much to our industry-leading strategies and our programs on key issues such as climate and human capital management. So we always work to meet our investor expectations by aligning our ESG reporting strategy with standards such as SASB, the Sustainability Accounting Standards Board; and TCFD, Task Force on Climate-related Financial Disclosures. So to wrap, I'll just say that our legacy of ESG leadership really helps to increase our competitiveness. It's very much tied to our business strategy. We very much view it as a differentiator in the marketplace by helping our customers to achieve their business objectives and sustainability goals without compromise. We've definitely been through challenges of 2020, as Antonio mentioned. But those challenges, I think, have reinvigorated our commitment to being a force for good, using our technology to advance the way people work. And as I look back in our 5-year history as a company in HPE, I'm proud that we've stayed focused on this core purpose, and the credit for that really belongs to all of our team members around the globe with that tone being set at the top, but our success being attributable to the work of all of our team members across the globe. So with that, I'll pass it back to Katy for some Q&A.

Great. Thank you, Antonio, Brian. That's really helpful context. And again, it's compelling to see how integrated your ESG initiatives are with the business. I want to start out by asking a question around where Brian ended the conversation, which is that the past 16 months have been the most disruptive in many ways in all of our lifetime. Talk, maybe directed towards Antonio first. Just how have the events of the past 16 months impacted your business and your ESG strategy?

Yes. Thanks, Katy. I mean where we lived in the last 6 months or so is unprecedented, right? Obviously, the pandemic disrupted our supply chain, many of the communities. And then we were already coming from a set of other challenges like macroeconomic challenge, geopolitical challenges, and then on top of that, we had social justice well litigated in the United States and some more areas of the world. And the first thing we have to do is to take a stance. I've been in the company now 26 years. And I'm a true believer that -- and our employees demand that when you believe in something, you need to take a stance and speak up. And obviously, I went out and made my opinion visible and clear about what we saw in social injustice. But ultimately, we took action. We took action on those issues. And Brian and I just walked you through some of the things we have done. But from the business perspective, we had to rethink everything. Obviously, supply chain resiliency. We saw a challenge and opportunity with digital transformation, which I believe in the long term is a great opportunity for our company. And then accelerate what we already knew because the one thing that I think the pandemic took away from all of us is obviously time. When you think about all the variables at play, the one thing that became an incredible challenge is time. We have let's say, Katy, in the company that the future belong to the past. And definitely, we took some very bold difficult decisions as a company. Obviously, the first thing was to preserve liquidity and then accelerate our transformation because I'm a true believer that our strategy is spot on. And it was validated by what we saw in the last 16 months. And we took kind of advantage of an unfortunate event to do the hard things faster and position the company into the future, but at the same time, do it with this aspect of sustainability, inclusion and diversity at the core. And that's something I'm really proud of it. Are we're getting credit for so far? Probably not, but I hope that over time, we will because in the end, it's just the right thing to do. I mean this is not a Ph.D. discussion. This is a human being discussion to begin with and then just business rationale. And I think we are well positioned into the future. And you will see here over the next 12 months, all the innovation we accelerated because of what we saw. But to your point, what we have done is integrate these aspects, not only in our purpose and our mission, which was core of our values, but into our corporate and operating cadence with clear metrics, which obviously, Brian walked you through. So tough time, but I'm actually very optimistic and excited about what we can bring to the market and help our customers and our communities thrive going forward.

And then, Antonio, the core of your HPE transformation strategy is to offer HPE's entire portfolio as a service by next year. You made some interesting comments about energy consumption and the big cloud data center platforms, which is interesting because we have actually seen in our survey work that there is a step back in plans to move to public cloud data centers. But just talk about how that as a service transformation fits in with the company's ESG strategy.

Yes. So I have been very fortunate to work across the company, every business line in this company. And the one thing I saw over the years, going back all the way to 2002 when I was in the printing business, is the need for customers to consume IT in different ways. In fact, I was part of a very small task team at the time, 20 years ago, to enact, incubate what is today Managed Print Services. We used to call that for the time HPE Print Advantage. And obviously, today it's a big business inside HPE Inc. But ultimately, what we see is customers want to not only consume IT in a different way and save capital, but also do it in a sustainable way. And this is where I'm a true believer that as we pivot more and more as an IT industry to as a service, it has incredible benefits from the sustainability perspective because we are able to meter everything we consume and charge exactly what customers are consuming. And, therefore, been very judicious about the usage of our sources. And at the same time, the construct of those solutions is not just a business model innovation with software on top of it or the key enabler of it because our offer as a service is by enabling all the software we invested ourselves, but also the architecture sitting underneath. And this is the difference between us and the public cloud. The difference is that we, as a company, we keep thinking about how we optimize every resource for that given workload that you can consume as a service. And we have the engineering capabilities to think that way because obviously, we have been kind of the king in compute for decades. But now we think about how we take a networking-centric approach, and energy and storage are the core of that. And you will see in the next generation, we're going to announce here in the next couple of quarters is that more and more of those solutions are going to consume less and less energy. And on top of that, I bring the software and the capabilities to only charge customers for their consumers. So they get double benefit, if you will. And we, as a company, have a unique value proposition that will help us advance our strategy as well as a part of what we do, but also ESG with it.

And Brian, you had highlighted that nearly $900 million of revenue tied to sustainability engagements with clients. Can you give us some concrete examples of how your team engages with the business units in these instances where clients are interested in the sustainability outcome of different solutions?

Sure, Katy. Yes, we host a team of technologists of sustainability technologists and sustainable transformation technologists that go elbow to elbow with our sales teams to help engage with our customers where this is a key area of focus for them. And it's around talking about the sustainability benefits of our products, but really working with our customers to understand their needs and truly co-developing a sustainable IT strategy to identify how the IT efficiency of our solutions can help them on their journey. And an example of that, Antonio referenced some recent wins. And one key example we talked about in the report is LyondellBasell, which you know is one of the largest plastics and chemicals companies in the world. They had a key interest in how our solutions could help them on our journey -- on their journey rather. And our ability to offer some environmental sustainability solutions really set us apart in that pursuit. And so with some consulting from the HPE Pointnext Services, we work with that organization to help them adopt a hybrid cloud model that's going to enable them to drive environmental solutions through their digital transformation. So just one example of one customer, and we're seeing an increasing amount where our customers are interested in how we can help them in their transformation journey. Another example is just through our HPE Financial Services and their asset upcycling services where we're able to help our customers really measure and report the impacts of their IT to measure progress towards their goals in the area of the circular economy. We provide for them a circular economy report that give some information about carbon, energy, material, landfill savings that are achieved by returning their assets. So just a few examples there. And Katy, I'll also just piggyback on some of the comments that Antonio made about changes or our approach to the past year and just really, again, focus on our focus on our people, on our team members around the world on human capital because that was such a challenging area. We talked a lot about this Inclusion Diversity Council. And I'd say that group was really key in driving employee engagement around inclusion around how we hire and retain a diverse workforce, around advocacy, how we use our employee resource groups and team members who aren't members of those to be allies and assist in our I&D journey, and importantly, our community, how we look outside the 4 walls of HPE to make investments in underserved communities. So that's 1 critical piece. We focused also in the last year for the reasons of pandemic and racial unrest, a lot on the mental health and well-being of our team members under what we call our For Real Life Program going beyond typical notions of employee assistance programs to really offer a number of programs and webcasts and webinars to our team members recognizing they don't leave their kind of fears and apprehensions at the door when they come to work, and things as simple as our Wellness Fridays where we've provided opportunities throughout the month for employees to take time off. And in fact, during the summer months, it's 2 full Fridays during the month to really recharge, to think about their mental health and wellness and really come back after that recharge. So it's really recognizing over the last year, the important part of getting us through these challenges as a business is recognizing the importance of the health and well-being of our team members.

Antonio and Brian, I just want to jump in here and ask a question about your net-zero by 2050 target. So Brian, you actually mentioned that you're going to be setting new targets later this year to kind of progress to achieve that. Can you maybe speak to what reduction efforts have been achieved so far? And sort of what intermediate goals you have and how you plan to ultimately achieve that 2050 target?

Sure. As I mentioned, 2 of our targets, we were able to meet ahead of schedule, our operations emissions target and our absolute manufacturing target, and we're working to reset those targets in the coming year to a new baseline. And as I referenced, 95% of our footprint is really generated from supply chain and customer use of our products. And so our strategy is really focusing on engaging these stakeholders towards that journey. And so some of those goals are around supply chain. We've committed that 80% of our manufacturing suppliers by spend. We'll set science-based targets, either they have them or we'll set them within the next couple of years to reduce targets in their own operations by 2025. And we're on track to achieve that. We've partnered with our suppliers, and we provide them training, tools, to help them kind of set aggressive goals and be able to meet those goals, and that's going to ensure that we're able to meet our targets there. And then from a product and solution standpoint, we've already kind of touched on the huge opportunity we see to help our customers achieve their own carbon emission targets. And so our solutions-based approach includes our pivot to everything as a service. And so we're focused on innovating to more sustainable technologies, but also equipping our customers with tools and expertise to use those technologies more efficiently. And so as I mentioned, we'll be resetting targets and communicating a new path towards that 50-50 -- 2050 ambition.

I think, Mark, the other thing I will add to that, and while we do all of that, we need to do it in a secure way, how to live in a difficult world with cyber. And one of the things we have done over the last 7 to 10 years is built the most secure supply chain. And that's why we are able, together with the aspects that Brian just talked through, to participate in very large opportunities both in the Department of Energy and DoD. Because we're able to follow from the the time we source low-level components and even raw materials all the way to the end of the life cycle of that product, basically validate the chain throughout the process of security. And so it is -- yes, it is all about carbon emission. Yes, it is all about energy reduction. 95% is all in supply chain, but we do that in a secure way. And the reason why is because, obviously, the most precious assets that we have today is data. And I predict that no longer in the future, that data will be an asset that will have to be recognized in the balance sheet of customers.

Antonio, can you maybe elaborate on that a bit? So we've seen a spike in cybercrime over the past year. What sort of new challenges has that created for your organization? And how might that have impacted your approach now?

Obviously, we have to protect ourselves, first and foremost. Listen, we are a target all the time, no question. I mean we are a company that innovates. We have thousands and thousands and thousands of patents, which are obviously the target for many entities. And we have done our very good job. I mean the reality is that we have protect ourself really well. But the year is good, Mark, as yesterday. So that's the bottom line here. But what we do for ourself, we offer to our customers. And one of the things that I truly believe that needs to happen going forward is not to protect the network or your compute farms, whatever it is. It's to really take a much more drier asset of architectures and the designs around data. And this is where we know. We think about now cyber but ransomware. We just did a very interesting acquisition with Zerto. And we are integrating them into the core architecture of our cloud security solution from the silicon route of trust, which is what we design in our products, which is a silicon we design ourselves, through the layers of software that we are building inside HPE GreenLake. And then offer data protection where basically, if the customer gets breached, they have an opportunity to restore that environment within seconds without dealing with what everybody know the ransomware is, but at the same time, be able to architect the security between the access to the data and the users and the things, which obviously, IoT is a big component. In fact, 86% of the attacks are not coming from the traditional data center. They're coming because now we are connected in so many things to the network. We, as a company, we had 14,000 devices to our own cloud, which is Aruba, which, by the way, managed more than 1.5 million devices. And we give customers 1.5 billion data points every minute. We have a massive cloud. And obviously, we have to do it in a secured way. So it is something that we continue to innovate. And this is the next frontier of innovation built into our as a service model.

Well, thanks so much, Antonio. I know you have to run to another meeting, so we appreciate your time today. So maybe I'll -- one more question for me and then I'm going to turn it back to Katy to wrap up. So maybe for Brian, more on the human capital side. It's kind of a twofold question. One, about your future of work plans and how that ties into creating a more sustainable and diverse organization. But secondly, on the talent acquisition front, there seems to be a challenge for many companies post the pandemic and sort of how you're approaching attracting talent in this backdrop.

Yes. We definitely always acknowledge that we fight for the best talent. It's a very competitive environment, particularly in the current environment. So we focus on a few pillars. I'd say recognizing that coming out of the pandemic, employees are going to have more choices of where they work and how they work. We were -- someone was chatting in the beginning this about the return to the office. So one key element of our strategy is what we're calling our edge to office initiative, our edge to office strategy, recognizing that coming back from the pandemic, the style of work has changed a bit. Not all of our team members will return to an office in the same way that they did before. And so we've established a strategy to distinguish ourselves as a great place to work to provide that level of flexibility for team members to choose to work in a way that works best for them. Some from home, some in an office a portion of the week. We recognize that people will be coming in our offices mostly for collaboration, for camaraderie, and so we're building and retooling our facilities to really meet that. So that's one. I'd say it's a laser focus on our culture. We've talked about our purpose being to advance the way people live and work and underlying that our key organizational beliefs. It's around accelerating next. It's around believing in bold moves. The power of yes we can. And importantly, being a force for good. We've talked about that a lot in this call as part of our ESG strategy. And so we think a lot about the culture that we work to drive and that focus on culture is helped retain those high levels of employee retention, but also those high employee engagement scores. So that becomes a differentiator. And then the last I'd say is our optimized total reward strategy. It's really focusing on that critical workforce needs and helping to meet those needs through innovative programs, not just around salary and bonuses, but around health and well-being, around work-life balance, that we can deliver maximum impact and support the broader needs of our team members around the world. Again, you saw that's reflected in some record levels of retention of key talent, but also some record engagement scores through some challenging times.

Mark, this is the biggest challenge I have as a CEO. One of the biggest job is to always plan succession and the other one is to make sure we have the right talent across the organization. And there is no question that there is a war for talent out there, and the pandemic has created different opportunities for people to think about how they want to work and where. And this is one of the reasons why I decided to move the headquarters to Houston and get the best of the both worlds, right? Brian is in San Jose today. I was there yesterday. I'm today in Houston here. But ultimately, we get the best of work. There's tall leadership, long-term architecture and vision, but it's mostly a technical community. And the rest doesn't need to be there. And Houston is the most diverse city in the United States. It's our second-largest site. But we got to create a footprint where we can attract and retain and develop the best talent. But as a CEO, I will say, put aside the pandemic, this is the ongoing challenge we're going to face going forward.

That's great. Focus on people is a good positive note to end the conversation on. I want to thank Antonio and Brian for sharing their ESG views today and for everybody who joined the webcast. I would encourage you to look at HPE's Living Progress Report, which you can find on the company's sustainability portion of the website. And please don't hesitate to reach out to either myself or HPE IR if you have any questions. Thank you again, Antonio and Brian. Have a great day, everyone.

Thank you, Katy, and thank you, Mark. Thank you, everyone.

Bye.

Thnaks. Bye.