International Paper Company (IP) Earnings Call Transcript & Summary

Hello, everyone. Good morning, good afternoon or good evening wherever you are, and welcome to today's webinar. My name is Meg Crawford, and I'm an ESG and climate strategy account lead for corporate clients at S&P Global Sustainable1. It's my pleasure to moderate today's webinar. It's titled: A Perfect Storm, Preparing Operations and Supply Chains for Climate Change Impacts. This is the third of 3 webinar conversations in our weathering physical risk -- Weathering Physical Climate Risk series. Replays from previous webinars on evaluating climate risks to mortgage markets and on real estate investing are also available, and we encourage you to go back and listen to those as well. So we recognize that the topic of today's webinar is of great interest to you. We want this to be an interactive session and encourage you to submit questions for discussion. At the bottom of your screen, you'll see a row of widget icons. Those icons will allow you to interact with us throughout the conversation. I'd like to point out the Q&A widget, which can be used to submit questions to the panelists, which I will help triage and organize for the group, as well as a survey widget. We always welcome your feedback. We'll also have a few polling questions throughout today's session. So please take the time to fill out our short survey after the webinar as well. We appreciate your insight and feedback. The webinar is being recorded, and an on-demand version will be available shortly after we conclude. If you have any technical issues during the conversation, please try refreshing your browser. If issues persist, please use the Q&A widget to contact us and a member from our technical team will assist you. All right. So those little housekeeping issues aside, it's my pleasure to introduce today's speakers. I'm thrilled to be joined today by several leaders from the corporate world as well as from the reporting and standard-setting world. Neil Stewart is the Director of Corporate Outreach at the Value Reporting Foundation, which is a global organization steering the integrated reporting framework and the SASB standards for corporate reporting. Susan Lorenz-Fisher is Senior Vice President of Corporate Responsibility and Sustainability at AmerisourceBergen. So based in Pennsylvania, AmerisourceBergen is a pharmaceutical products company that has a vast global sourcing and distribution value chain. Matt Inbusch is the Senior Manager of Sustainable Operations at International Paper Company. Based in Tennessee, it's a global paper products and packaging provider to both industry and to consumers. And Michael Weber, Senior Director for Climate and Environment, which is part of their global impact sustainability and well-being Group at Mondelez International. So headquartered in Chicago, Mondelez, as you all may know, sell snack food and beverage products globally, including my kids' favorite, Oreos and belVita crackers. We're going to start off today's conversation with a couple of polling questions that are related. The first question is kind of taking the temperature, so to speak, on the folks on the phone in terms of your sort of personal and professional experience with the physical effects of climate change. So has your company already in the recent past been impacted by acute or chronic physical effects of climate change. So not at all, somewhat affected, substantially affected or have had extreme impacts over the recent past. And we'll just take a moment for folks to respond to your experience thus far with the physical effects of climate change, flooding, sea level rise, increased levels of storms, drought, that kind of thing. All right. Let's see if we got any -- let's see what kind of -- somewhat and not at all being the 2 top. So that's very helpful and useful information. So I've been working in the climate adaptation and resilience space for quite some time. And in my experience, particularly after events like Katrina or some of the hurricanes that we had in the Northeast, sometimes these results go up to substantially and extremely. Sometimes it's sort of the point in time recent effects. But the fact that nearly 60% of all of the folks on the phone have experienced some level of the physical effects of climate change is quite telling. So our next polling question is to get at the response to this experience of the physical effects of climate change. So have you found that your company has sufficient tools in place to identify what the risks are and to effectively manage them? So not at all, somewhat, we do -- or substantially in place -- have tools substantially in place or very well integrated into the businesses response. So we'll just take a moment to get the temperature on the experience of whether your companies -- you and your company feel prepared to address these risks? And what are the responses, please? Interesting. So kind of all over the place in terms of not surprising that few organizations have response mechanisms or strategies that are very well integrated at this time. It's an evolving landscape and still very much in a place where we're all learning and learning how to adopt the right strategies and tools and data to respond to these risks. But very encouraging that at least over 60% of the folks have at least some response in place or feel that there are some tools in place to respond to these risks or that are substantially in place already. So let's dig into this a little bit further. What I'd like to do is just sort of turn over to each of our speakers to talk a little bit about what their polling response was, what their polling question's response was, but really at a high level. Just tell us about your work and how your role intersects with identifying and managing physical climate risks either in operations or in supply chains. So can I turn it over to Neil to get us kicked off to introduce yourself?

Sure. Thanks, Meg. So I'm with the Value Reporting Foundation, and we were formed last year out of the merger of the Sustainability Accounting Standards Board, or SASB, and the IIRC, the International Integrated Reporting Council. This summer, we're consolidating again. Now we're consolidating into the IFRS Foundation, and we're launching the -- have already launched the International Sustainability Standards Board. So the ISSB was launched at COP26 in November in Glasgow. It was created in response to market demand, market demand for a common language to communicate around sustainability risks and opportunities, especially around their impact on enterprise value, so as business risks, as investment risks. The IFRS Foundation heard the call that we had a patchwork of voluntary reporting frameworks and standards, but we didn't have this really solid baseline. And the market was demanding this. So the IFRS Foundation, with the IFRS, the International Financial Reporting Standards, already used in 144 countries around the world, and with the oversight of securities regulators, including through IOSCO, the International Organization of Securities Commissions as well as the SEC. The IFRS Foundation was the right one to take on this job. So we have 2 standards out for comment, including a climate standard. I'm going to give you 5 quick reasons why this is good for companies, why this should be seen not as a new disclosure burden but rather as an opportunity. First of all, the ISSB is building on what's already in use in the market, especially with regard to climate, the TCFD as well as the SASB standards. Second, investor demand is strong. Investors have already coalesced around TCFD and SASB standards. And the ISSB standards are the next evolution of these established frameworks and standards used in the market. Third, this is definite simplification of the ESG landscape. We're essentially taking 5 frameworks and standard setters, standards and boiling them down into one. So we're taking acronyms off the table, and we're simplifying the alphabet soup, which is such a pain point for companies. Fourth, this is our best bet to harmonize across jurisdictions around the world and come to a common language. And lastly, the ISSB is taking an industry-based approach. Now investors want an industry-based approach that is just focusing on the sustainability issues relevant to a business model, a company's business model and the related risks and opportunities in a given industry. This improves the comparability of data across companies and markets for investors, but it also helps reduce the burden to reporting companies by just focusing down on that subset of risks and opportunities that are material in that industry. Now this is a webinar on the impact of climate -- physical climate risk on operations and supply chain. So why am I talking about reporting to investors? This isn't necessarily the topic today. And the reason is that standards are -- they're not just about reporting for reporting's sake. ESG reporting is not an end in itself. The companies and boards, and managements and boards now see standards as integral to enterprise risk management. Effective oversight and management of risks and opportunities requires reliable data. We all know the management added, you can't manage what you can't measure. And to that, I would add, you can't compete if you can't compare. And so standards having this common language of what are the KPIs, what are the metrics, what are the specific topics from industry to industry really helps management and boards, zero in on those financially material factors that are risks or opportunities, and those can include -- definitely include physical climate risk. So that's a little bit about the ISSB and why we're relevant to this discussion.

Yes. No, that's super helpful, and thank you for helping to set that additional context. It's not just that companies are experiencing already the physical effects of climate change. I'm wondering how to manage it but there are stakeholders, investors and market participants and others are looking for greater transparency and disclosure around what these risks and how they're being managed. So that's very helpful to add additional context to our conversation today. I'm going to turn it over to Susan and Matt and Michael in that order to talk a bit about how your companies are starting to think about these issues and some of the steps you've already taken a little bit about your role and how it intersects with the physical climate risk issues we're talking about today.

Thanks so much, Meg. And Neil, that was a really helpful perspective to hear. So I'll piggyback on a couple of things you said by first talking a little bit about AmerisourceBergen's purpose. So as a company, we're united in our responsibility to create healthier futures, and that's something we take very, very seriously. And so as a company, we're delivering life-saving medication around the world every day to hospitals and health systems and pharmacies to really make sure that our patient is getting the treatment that they need. And so in a world where there's increased intensity, frequency and duration of natural disasters, that's something that really for us is a factor in how we plan in terms of business continuity and where in the world we're operating or providing a specific service. So for us, it's really about considering that responsibility. And when we think about that and see the impact that all around the world of natural disasters and other climate-related events are having, it absolutely made a lot of sense for us as an organization to really spend some time thinking about what are our physical climate risks, and how do we think about that and factor that into how we operate and how we play out as a company. It's not always been the easiest concept, we've been affected by natural disasters for years and years around the world, but it's really, again, focusing in on that increased intensity, frequency and duration that we really use as a lever to think about how this may impact us as a company and how we can proactively plan to really, again, be living out our purpose as a company. So we really see those factors all tie in very, very tightly, kind of what drives our motivation as a company to really understand and plan for our physical climate risk.

Fantastic. Thank you so much for that perspective. Matt, can we turn it over to you to describe a little bit about the perspective from International Paper.

Yes. Hi. Good morning, good afternoon. So International Paper, if you're not familiar, we're a large global manufacturer. We effectively take renewable resources, so sustainably managed and harvested wood fiber and recovered fiber, recycled corrugate and paper, and convert that into products people use every day. And you touch these products and probably most of your daily lives, boxes in particular. So we're one of the largest corrugated packaging producers in North America. And those products -- those boxes go into lots of different end uses, supply chains, e-commerce, grocery and many others. We also produce pulp that goes into absorbent hygiene products and other consumer goods. So we have a global footprint. We're U.S.-based, and we mostly operate our mills in the U.S. Southeast. So our kind of sourcing strategy and operational strategy and climate resilience strategy are largely focused on that region, but we have global supply chains, global customers and some global operations, including in Europe. So we do think at a -- kind of a global scale. As far as climate -- our climate approach, we have SBTi, science-based target, of 35% reduction in our greenhouse gas, absolute emissions across all 3 scopes by 2030 from a 2019 baseline. So on the climate mitigation side of things, that's where most of my work is focused on our operations and our supply chain in that regard. But as it relates to the kind of climate adaptation piece and I think more of the theme for today, we're working hard on that as well. And I think a lot of the points that Lorenz just raised are relevant for us as well in a different sector, different contexts but thematically similar. And we actually just put out our first ever TCFD report about a week ago as part of our 2021 sustainability reporting. So I encourage you to check that out and provide any feedback that you have for us. And I know we'll talk more about the details of that. But I think our -- broadly speaking, our approach starting out has been to sort of walk before we run on that front. And that applies to both the internal use of our climate modeling data and scenario analysis and then also what we're reporting out publicly, largely sort of a qualitative approach at this point, but certainly something that we're going to be ramping up and working to quantify more deeply in the coming years as our stakeholders and potentially regulators are pushing for that.

Great. Fantastic. Thank you so much, Matt. And last but certainly not least, Michael, would you mind introducing yourself and a little bit about your role and your focus on this topic?

Sure thing. Hello, everyone. Good morning, good afternoon. My name is Michael Weber. I have the easy task. I can piggyback on so many relevant comments across the board. At Mondelez, we are really -- we work towards a future where planet and people thrive, which basically means we see climate and social responsibility go hand in hand. I always feel and I want to call it out here that one without the other isn't possible. So linking the 2 is essential to everything we do. When it comes to my particular role, I'm looking at the climate and environment, which really encompasses global decarbonization and water stewardship strategies as well as the broader climate risk approach. While our climate risks are really anchored in our enterprise risk management processes, we are really working continuously to enhance our approach for better granularity and ultimately also to anticipate future compliance requirements and this is where I'm coming in. My role really looks after bringing that clarity within the evolving world of climate risk assessment, I should say. The spending across the end-to-end supply chain, which really means Scopes 1, 2 and 3 for that particular manner, working through internal subject matter experts, but we also have external partners that are complementing our expertise. In Mondelez, we approached the topic of climate risk assessments in multiple stages. I don't want to preempt, it's a later question. But certainly, it has been an evolving element across many years. There, I think, data sets and models evolved over time and just get access to a lot more capability and tool sets out there that could be deployed by corporates. And then I think today's discussion is really about bringing the journey map together with the need of clarity and future of reporting and compliance requirements.

Yes, and thank you so much for being here. That's fantastic. All of your perspectives are incredibly valuable. What I'd like to do is before we get into a bit of moderated conversation to drill down into some of those issues and topics challenges and opportunities that you've raised. We're going to do one more polling question, just to get a sense from the group on the phone what their challenges are or have been, wherever you are on your journey with respect to just starting out or adopting certain strategies or reporting to address these issues? What do you find is your biggest challenge to identifying and managing these risks? Is it a lack of data on your own visibility into your own company's operations or supply chain in order to understand the risks? Is it insufficient climate risk modeling tools to apply to that data with a high enough level of quality or certainty or managing the inherent uncertainty in the tools that are out there and within Climate science itself? Or are you finding maybe one of the barriers as a lack -- or more internal, not so much external, but internal barriers, perhaps lack of buying from leadership or across the business divisions that you need to organize to focus on this topic. So let's see what the -- give folks a moment to fill that out, and let's see what the responses are. All of the above. Yes, and this isn't a surprise. I mean this is -- we're sort of leading questions here, but this isn't a surprise at all. This is what we at Sustainable1 are hearing across the board from companies, and I'm sure Neil in his role in engaging with companies across various sectors and in various markets are hearing something similar that a lack of visibility internally can be very difficult to get the right data that you need in order to have effective decision-making, the right tools to apply to that data to support decision-making. And then obviously, we're always working in kind of an imperfect world in terms of data and tools and metrics in climate science itself certainly has some inherent uncertainties that compose a challenge. And we hear a lot that getting buy-in from across business divisions that are needed it's a -- climate change is a global problem and businesses have global value chains and getting all of the right stakeholders across all business divisions can be a significant challenge.

So what I'd like to do, if it's okay, I'm thinking of maybe starting with Susan and Matt and of course, Michael as well. But just wanted to hear how did you get -- how did your company get started with your climate risk management and reporting. Like what was the journey you check? What was the impetus for undertaking this initiative, hearing about any specific impacts that your company faced and the reaction to it. And similarly, what advice would you have for those just starting out? Like what might you have done differently in retrospect. Susan, you had a lot of really interesting perspective to share about how this physical climate risk really intersects directly with the company's purpose. Do you mind talking a little bit more about our drilling down and just what some of the specific examples are with respect to how your company has been impacted.

Yes, absolutely. So I would say that it started from the perspective of materiality. We were prepping for one of our ESG report a couple of years ago. And looking at the climate piece, really talking about what we were doing in terms of mitigation and then looking at the adaptation piece that are really challenging ourselves, is okay, what are --- we what more can we be doing here? How do we really integrate this into how we show up as a company. And so we did like a desktop physical risk assessment just with -- I think it was a summer intern who did that for us and came back with some interesting data. And then we dealt with Hurricane Irma, Maria and Harvey all was in a pretty close proximity of each other. And a number of our locations had to go into backup plans and particularly with how those combinations of natural disasters impacted Puerto Rico and the cold chain, so which is really looking at from the supply chain -- from the perspective of refrigerated products and medications, insulin for example, so much planning had to go into that in the couple of days ahead and in the aftermath that we really after that, but okay, it's great. We've done some of this analysis from kind of the informal way we need to be much stronger about how we look at our physical risks. And those combination of events really, really proved it. And again, to your point around purpose, the work that our team members said, all around the world and particularly in Florida, Puerto Rico and Texas after the hurricanes was really amazing. There are so many stories about how somebody needed a specific medication, and they were going to disaster zone or someone needs a chemo bag at a particular time and the incredible amount of effort that people put into action to really be able to continue to support those patients been really difficult. Environments that have been impacted so badly from the hurricane with another reason that we just kind of looked at. And so we have to -- this is an opportunity for us to do more, understand, look at our physical risks, not just in the short term but over the longer term, and really be able to talk about how climate adaptation and resilience are intrinsically linked to our broader ESG strategy and company progress. So probably a little bit of a longer answer there, but I would say that's the journey that we went on and where we really saw the opportunities and importance of double-clicking into some of the physical climate risks and really doing more and formalize again.

Okay. That's really helpful. So building the business case had AmerisourceBergen was pretty straightforward, data just in terms of seeing boots on the ground, we're facing these issues now, and it's a material business impact. And Matt, can you talk a little bit about your experience in International Paper. So you've put out your first TCFD disclosure, but that conversations about putting out a TCFD disclosure happen long in advance of actually getting the publication out the door. So I don't know if you can talk a little bit about the journey at international people internally in terms of the motivation, the decisions that were made in order to address these types of risks.

Yes, definitely. And you're right, this has been several years or at least a few years in the works. And I think -- to the kind of end of your question a minute ago in terms of what's in the sort of learned and what we're learning, I would say that the big headline would be that it's an evolution and it's an ongoing process and the modeling and the analysis itself is actually kind of the easy part. It's one you do with all that is the much more interesting, impactful and, I think, challenging piece of it. But we -- yes, as we -- so I mentioned, we have our science-based target for 2030. That's part of what we call Vision 2030, which is our road map for the next -- for this decade around our most material topics. And so kind of 2019, '18, '19, as we started to build our materiality for this new strategy, we recognized pretty quickly that our stakeholders and our strategy itself would need some pretty robust climate modeling to be a part of it. And we have internal like a lot of companies, cross-functional teams that we leverage and work through for a strategic and sustainability kind of topics. So we have a team like that, that we've been working with closely internally to sort of help define our material areas and then build a consilience strategy around them. We've also relied on external third-party modeling through The Climate Service, which is an S&P company now. And so using the Climanomics modeling that they provide is actually quantify those material climate risks and then help us figure out what to do with that. So we've got that internal and external piece, which I think has been really, really important. And then like I said, so we think about kind of primarily the internal piece, what does this mean for us in terms of our climate sort of resilience strategy, how do we internalize the findings from these analysis and then do something with them. Michael mentioned the enterprise risk management, I think Neil did as well. So that's a big important internal stakeholder for us is our ERM council working with that group to get climate risk kind of on the matrix, so to speak, and then help channel that into action that can build our sort of resilience against physical climate risk. I think a lesson there is that it's not as easy as just putting it on the matrix that climate is this sort of inherently different type of risks, so it raises all these bigger questions about the timescale involved, the dollar materiality sort of thresholds and things like that. So it sort of opens up a bigger conversation about enterprise risk management or at least it has for us. I think the other piece, like I've said, sort of starting slowly in terms of, well, relatively slowly. It's a big step for us, but we're not putting out sort of the financially quantified numbers yet in our scenario analysis in our TCFD report, for example, we're starting with a qualitative kind of narrative describing the risk that we see in our potential mitigation approaches and then we'll scale up from there. The other thing I'd like to come back to maybe later in the hour would be the importance of an industry or a sector-specific approach. And somebody mentioned working with external, some of the industry partners, I think that's huge because the risks and the modeling involved and the analysis and the strategy, I think, does need to be sector-specific and it looks pretty different for a manufacturer versus a tech company versus pharma and so on. So I think that's an important piece that we're continuing to work on.

That's really helpful perspective. You touched on a lot of really, I think, hot button issues. The time scales and the dollar amounts associated with all of these types of risks and how do you make that decision useful. Michael, you touched on a lot of the climate risk assessment piece in your opening remarks. I'd like to drill down a little bit further with you on what tools you're using. And I think it's interesting more that both Matt and Michael have now raised the issue of the climate -- the physical climate risk is part of our overall climate strategy. What tools are you using? And how or if does that intersect also with some of the transition risks, so to speak, that we're, that were -- that your companies are also having to deal with. Michael, do you mind talking a little bit about the sort of data and tools that you think in climate risk assessment that you're using at Mondelez?

Yes, sure. Absolutely. The journey, I think it's also part of the journey where we are coming from. Ultimately, enterprise risk management systems, pick up -- pick up on many of those risks across the board, but not necessarily under the banner of climate. There's a high level of interconnectivity going on here. And if we were -- that's my personal opinion, if we were to start the whole journey all over again today without having the precursors, doing all of the assessment at the same time, the physical, the transition, it put -- bring out those interconnectivity is a lot stronger. Where we are coming from is more on the enterprise risk management side. The huge risks are much more obvious and visible like the hurricanes that were mentioned, right? And data availability is about stronger, some models came up earlier. Modeling tools, insurance companies use modeling tools as an example. So those were available and accessible earlier. And I think that was the main reason why ERM systems typically pick up on the acute side of things earlier. I think as a second step, typically, the more chronic risks from climate, temperature increase over time are certainly elements where modeling tools have evolved significantly. And Matt has mentioned the TCS, The Climate Services, as an example, which we are also using to help us on the chronic as well as a huge risk side when it comes to quantification. So a third step in that overall metric would be the transition risk. So now today's discussion is not focusing so much on transition. But in my risk universe, they are equally high on the radar. For me, it's a wrap-up package deal. If I wanted to give a total climate environment overview, transition risk would be right there. And talking about interconnectivities again, carbon road maps are living in every one of those spaces. We -- as a company, we started with a well-below 2-degree Celsius. We've joined net zero last year, and in the -- are in the process of transitioning our road maps and our trajectory towards net zero. But it's very clear in our carbon place in the physical as well as in the transition space. And that's why I think the advice to companies starting the journey would be to do the assessment altogether at the same time. I do believe that the major challenges ahead of us is -- lies in the data availability. Today, in today's world, I am, I think we are, from a data granularity perspective, talking about Mondelez. We are -- we have the input data needed for the modeling. But this is an evolving space. It gets more granular, the asks are becoming, I think, vaster, and it's going to be ever-evolving and staying on top of what's needed in order to be granular and transparent enough, I think, is one of the challenges ahead.

Thank you. I'd like to drill down a little bit. I don't think we should take for granted that all of the folks in our webinar today know exactly what tools that you are using. Do you mind if I ask you, Michael, Matt and Susan, to describe a little bit about specifically just very good what was the process? Were you using internal capabilities, external capabilities? What were the models, what was the data? I think we should probably just drill down very quickly on what solutions are available, but also being transparent about what their strengths and weaknesses are certainly. Do you mind just putting a pin in what the specific tools are that you're using, Michael?

Yes, absolutely. I mean when it comes to the wider supply chain risks on the physical side, it is the tool that I just mentioned, Climanomics from The Climate Services. I think there are other tools out there, but the ones that for the output that we are looking for, it was the tool that made our short list. It basically looks at the physical impacts across our supply chain, input data requirements are obviously needed location points, value-add assets and the like. So a certain level of granularity of supply chain end-to-end is needed. The outcome, the output is something that we discussed as a company. At this point in time, value-add loss is one of the key output drivers within the company with different type of metric systems, but you can translate one into the other, depending according to the requirement. We also use with our insurers together various models there. So we are, how to say that, to manage the uncertainty, we overlay multiple models to come to a key conclusion. Not to say that the tools are not all consistent, but they are designed for a slightly different type of purpose depending on the outcome. So that's how we manage uncertainty. The other element, I think, is when we talk about the limitations to the key challenges of using models is basing financial impact on single analytical points. Single analytical points, a geographical single analytical point, for example, that's something that we had discussed the benefit of scale from a wider company perspective allows us to work with average impact considerations. As an example, talking a commodity that's sourced across multiple countries and growing regions where a single impact point might be showing a high risk, but the wider growing region might be a moderate or different type of risk. So we have to always see in context what the model does and how we are looking at the wider supply chain element like a commodity. And I think that's one of the considerations that we watch out here.

Okay. That's super helpful. And just to remind the folks on the phone today that we do have a Q&A box widget, if you have any questions for the panelists while we're in on conversation, please feel free to put them into the Q&A box. Let me turn it over to Susan and ask basically a similar question of when you're first starting out, you don't really know what tools necessarily to look for or what output, as Michael mentioned, you need or are looking for. Can you talk a little bit about that at your company, what data sets or databases or tools or metrics where you have you been leveraging at AmerisourceBergen to try to get a better understanding of climate risks.

Yes, absolutely. Thanks, Meg. So I would say when we first started on this journey a couple of years ago, it was very much focused on desktop kind of informal assessment done internally. And we realized pretty quickly that data was sparse. We were looking at websites, different models for different geographic regions. So we made the decision to move in the direction of leading on a third party for it. And so we did an assessment of our top 100 sites, which was a really positive exercise because we have a really good point of reference around what our key physical risks are across our major operating location. At the same time, about a year ago, the AmerisourceBergen footprint changed pretty significantly. So we acquired a large company called Alliance Healthcare with significant operations in Europe. And so as we kind of go through this exercise every couple of years, then we decided that we need to make sure that we're -- our top 100 sites have changed. They're not the same as they were 2 years ago. So we're really looking now at more of a dynamic model where we can have access to data and assessments on a regular basis through a third-party service rather than necessarily like a onetime snapshot. And I think our reasoning behind that is because we know data gets better all the time. Databases are improving. The level of detail that you can get if you're looking at the physical risk on one particular site, it's improved in just a couple of years. So that dynamic approach where we can understand what that physical risk is and not have it just be a onetime kind of bespoke expertise is definitely where we're headed.

Yes. The iteration certainly is kind of baked into the process. It's just physical risks transpire over a significant amount of time, but the business is changing. The company is changing. The supply chain is changing. So there's just a lot that is sort of baked into that iterative process. That makes sense.

Exactly.

So I'm just looking at a question that came in. What are the 3 major climate risks that can impact a company? So that's super useful and helpful. I think what I'd like to do is table that question for just a moment and get and ask Matt, the same question that I was asking of Michael and Susan, which is, again, sort of what tools, data metrics, sort of that analytical process of quantifying -- identifying and quantifying these risks to make them decisions useful. Can you talk a little bit about what tools and data you all have used at International Paper. And yes, to the extent that you want to -- each panel wants to say a little bit about the top 3 major climate risks that have impacted the company, that would be helpful as well.

Yes. Well, very quickly on that point, we -- like I mentioned, we operate mostly in the U.S. Southeast is where our big mills are. So we've been exposed to coastal, particularly, hurricanes and storms for many years and track those impacts and report on them through our financial and CDP reporting. So that's -- I mean, I think the physical sort of physical storm-related climate risks are pretty clear and present to us. I think the other big one that jumps out is we're a forest products company. So the impact on our supply chain, particularly for wood fiber is something we're tracking very closely and prioritize in our modeling. We haven't seen impacts really there to date in any kind of material way, but that's certainly a big one on the radar. But so I think I agree with a lot of points that Michael and Susan made in terms of the overall approach, I think about it kind of in a few buckets. So there's the physical operational, physical sort of impacts, potential impacts on our operations, like I mentioned, where we're exposed to these climate-related impacts on -- especially in sort of low and high coastal areas. That's where we really use the TCS modeling is to focus mostly on our operations and where and what magnitude and potential likelihood, we might have these increasing climate-related impacts on our operations. To Michael's point, we kind of layer things in. So I also work on our Water Stewardship strategy. So we use Aqueduct -- WRI's Aqueduct data. historically more for our Water Stewardship kind of approach and prioritizing facilities and actions, but more and more of those 2 are coming together to be sort of complementary models that we can continually refresh as the data improves like Susan mentioned. Within our supply chain, actually, this gets back to my point about kind of industry or sector-specific collaboration, we're actually part of the advisory or development group with the World Business Council, WBCSD, that's developing TCFD reference scenarios for, I think, it's food, ag and forest sectors. And so that's not available yet, but it's in the works, and it's the kind of thing that a year from now, 2 years from now, we'll be able to draw on and actually incorporate into our scenario analysis and focusing on the things that kind of these sectors that we're a part of have identified as the really critical issues to focus on and what tools might sort of come out of that and complement that approach. So that's sort of what we're thinking particularly on the wood fiber supply chain side in terms of kind of outlining our approach. And then on the transition risk, I know that's not the topic here today, but to Michael's point, that's very clear and present and actually in our TCFD report this year, we outlined that those transition rates are actually much more -- the ones they're much more focused on, and the short term in terms of potential regulations and other changes in the markets and so on. And there, we're not really relying so much on external modeling because I think it's just much harder to model those transition risks. And so we're relying more on sort of our own materiality analysis, internal and with stakeholders to define where our market is going, where our regulation is going and then kind of doing the math on our own to model out what that -- what those impacts that look like. So I'll stop there. That's a lot.

Yes. No, that's very helpful. And I've heard a couple of things that you -- sort of the 3 sort of representatives from the business world have raised for us. One is things like when you're thinking about what tools -- analytical tools you use or thinking about what's the output that's needed from the very beginning, what output do we need or the need for sector-based approaches. And I'm just wondering from Neil, what are you seeing and hearing from your 30,000-foot view of engaging with companies across different sectors and markets, what are stakeholders looking to see in terms of output in reporting around climate risk? And also, yes, maybe talk us a little bit about what the advantages would be around sector-based approaches to reporting on these risks.

Yes, I think it's really interesting hearing these 3 companies talk. And you can see very clearly that we've gone through this quite dramatic shift over the last 5, 10 years from stories to numbers to metrics, right? We've gone from qualitative to more quantitative. And that's both to manage these risks and opportunities as well as to communicate them out to investors and allow investors to make their decisions and guide capital to where they can reduce risk and increase return. And it goes a little bit to what the SEC has said in proposing a climate disclosure rule is that companies are already using this information, reporting this information, and investors are already using this information. And what the SEC is trying to do is provide some rules of the road provides some sort of consistency and comparability across these metrics. Because I think that's still where we're at. We're still at a stage where we can see clearly that these 3 companies Mondelez, AmerisourceBergen and International Paper are really managing very well in a quantitative fashion. There are risks and opportunities in there, they're clear on what their output is on improving performance, improving performance against these climate factors to help mitigate and adapt to them and ultimately have a more sustainable and successful business. But what we don't have necessarily is the consistency and comparability for external audiences. Now to your question about the industry-based approach. And Matt raised this, he pointed out the importance of a sector-based approach. And we heard this in a couple of different ways. And then this question came up about what are biggest climate risks that impact the company. And our belief, the ISSB belief in what has always shaped the SASB standards is that those are different from industry to industry. And I think this came through clearly in the discussion we've been having. So when you think about what are the top 3 climate risks, it's not the same across the board. It might be, indeed, it might be, say, a warming -- gradually warming planet, a chronic problem for some companies. It might be acute risks like wildfires or flights for others. It might be in product design and reduce demand for a company's products if they're not ecologically-friendly products and the risk that they can't design better ones, it might be in company supply chain and unable to source the ingredients for the -- or the raw materials for the products due to climate change. So in many cases, it might be water. It might be ecological damage. There's many different types of both physical acute and transition climate risks that could affect different industries in different ways. And again, the ISSB approach is to reduce the burden on companies. We have 3 big companies here, well resourced, well-staffed with -- but what we're hearing a lot is that smaller companies are really challenged with us to start getting their heads around their carbon footprint, their Scope 3, they just don't have the capacity. And so that's where that industry-based focus can become especially useful, reducing that reporting and burden the data gathering, verification reporting burden as well as helping to surface more useful information, decision-useful information and that means decision useful for investors but also decision useful for Boards and management. Just one last thing in that, as we hear about the importance of investor-grade information. That means it's rigorous. It has the controls. It has the data governance around it. It might be audited. I talk about it also as director-grade for Board-ready because the Board equally, if they're basing management, executive remuneration decisions, funding capital raising decisions and agreements or loans around it, if they're doing M&A due diligence based on ESG factors, it's got to be equally rigorous data that they're relying about.

That's very helpful. In terms of just reviewing what that decision-useful information is both from a physical risk perspective and from a sector-specific perspective. A question did come in that we -- that Sustainable1 do get a lot, which is a lot of the conversation is focused on the very clear and present risks associated with changes in climate. But there are a lot of business-related opportunities that can also be identified and found that will be unique to different industry sectors, certainly, but just opening it up to Matt or Susan or Michael or Neil, what is the conversation, if any, internally at your company around incorporating the identification of opportunities into these conversations. Neil, do you want -- you looked like you had something to say. Do you want to say first...

Oh, I'll just -- I was just leaning in for a better look at the questions. But no, I mean, clearly, and I can sort of maybe predict what some of our companies might say because it's very clear that, for example, for a company with a renewable resource like International Paper and start to think about replacing plastics weren't very obvious one, headline, right, placing plastics with our renewable resource, big opportunity in the face of climate environmental issues or AmerisourceBergen, as Susan talked about, responding -- being ready for those physical risks and better able to respond being a better provider in response to these changes or Mondelez is just creating better products to meet consumer demand that consumer is concerned with climate change and with the supply chain issues and being able to build market share around better products. So I mean those are just my simple 30,000-foot level view of these opportunities, but you can see it very clearly in these 3 very different industries. And you can see those opportunities in terms of product design, in terms of better supply chain management, in terms of increased market share that right across different industries.

I think you nailed it from -- for our company, we didn't coordinate that response together ahead of time, but I appreciate the shout-out for our renewable kind of business model. And what's exciting for us as part of our Vision 2030 for the first time, we have a product sort of focused strategy around renewable solutions and a set of targets under that and then working on business level road maps for what does circularity mean for our packaging business versus our pulp business and really quantifying that. So that's a really exciting whole opportunity area that has always been there, I think, but it's really -- we're getting much more sort of strategic and specific about it. There's other more specific opportunities for, I think, every company and we outlined some of those in our TCFD report where we look at the way that we're set up. We use a lot of carbon-neutral bio-generated energy in our operations, and we can leverage that through renewable energy credits and our own power, green power footprint and so on. So there's some more sort of tactical opportunities, I think, as well emerging. I think that the challenge is there and just again back to the kind of common theme is just how do you quantify that? And then how much of that -- or how do you sort of disclose that? And Neil, I'm glad you mentioned the SEC because I think it's a really interesting moment where the stakes are potentially being raised in a huge way around these disclosures, risks and opportunities. And I think it remains to be seen sort of what that proposed rule, whatever it looks like might sort of do to this space in terms of maybe compelling more companies to report because they have to, but then also what impact does it have on the sort of when the legal liability ratchets up so significantly? What does that do to sort of the quality and the granularity and the usefulness of the data that companies are disclosing and especially the financial numbers they put on those things. So anyway, yes, my quick thoughts on that.

Susan or Michael, do you have anything you want to add to that thread of the conversation. Otherwise, I was going to turn it over to -- we've about 5 minutes left. So I'm going to turn it over to our last sort of wrap-up piece. But any other thoughts from you all at all before we move on about the opportunities associated with these types of client and risk assessments.

I think Neil and Matt covered it perfectly. I wouldn't add anything.

Yes. Same her, same here. I'm actually thinking that there are so many similarities across the industry sectors outside of food and bev, even with papers. I think we can learn a lot from each other.

Yes, fantastic. We do have one last polling question, which I think gets to kind of wrapping up exactly what -- what's needed, so to speak, what more is so much more is needed. We're identifying a lot of great progress with respect to quantifying and reporting on these types of risks. But certainly, what would folks on the phone say would be needed to advance these climate risk assessments? Is it more asset-level data, that's more granular? Is it better links to those -- that value at loss that Michael referred to. Is it potentially more data that's in vulnerable areas or in emerging markets, where there's not a whole lot of visibility. Let's see what folks seem to think about those gaps, so to speak, and better link to financial impact. Okay. Yes, that emerged a lot in our conversation over this past hour as well. Just talking about the outputs we heard from all of our company panelists about the outputs that are needed and how to make them decision useful and linking them to the business case and the financial impact, and we certainly heard from Neil as well what investors and Board members and executives are looking for in terms of really linking that to financial impact these risks to and opportunities to financial impact. I think we have another question, we have time to get to, yes. No, this is a good question. So the question that's been raised is business and corporate and intellectual property around climate disclosure and how to improve reporting without reducing competitiveness. So there's certainly that kind of market-based conversation. There's also the conversation around voluntary and mandatory disclosure as well and sort of what the implications are between those 2 different types of reporting. But any thoughts from the room about how much is too much disclosed or how little is too little to disclose and what IP issues might arise around climate disclosure and reporting.

I think there might be some isolated cases of where say, an internal climate -- carbon price rather is some kind of competitive information, say, for a bank. But overall, I hope this won't stand in the way of climate reporting. I mean the world definitely, casually needs transparency. And I think that any competitive barriers or competition barriers shouldn't stand in the way.

Great. Thank you, Neil. So we have just another minute left. I think we've covered all of the questions that came in. I'd just like to thank the panelists so much for your time today. And in the last minute that we have, do you have any closing thoughts or ideas about. So what your advice would be to folks on the phone that are just getting started in our journey are looking to advance their journey? Any final remarks from the folks.

I'll borrow someone else's. I heard recently at a conference, John White, the former Head of Corporation Finance at the SEC, say, focus on your own journey, don't just wait for the rules. Also, don't just focus on disclosure, but focus on substance. And I think we heard that clearly from the companies in this webinar today. They're not just sitting on their hands waiting for announcement from the SEC or from other regulators. They're really clearly acting and focusing on the substance of managing these risks, not just on the disclosure.

Yes. And Matt, I heard you say walk before you run. Was that your final closing advice?

Yes, yes, I think so. I think conversations like this are really important. I wish I -- we had heard something like this and have been involved in it 2 or 3 years ago because it would have been really informative. So I would just appreciate the conversation that would encourage more of this.

Thank you. And Susan, what final thoughts do you have for the folks on the phone today?

I mean there's no right starting point. I -- my right would we just find a way to pull together a team and start thinking about it.

Yes. Michael, last but not least, of course, any final thoughts for the folks on the phone before we wrap up?

Very similar. It's a journey, which keeps evolving. So getting started is the key element here. And even for the ones that are longer on the journey since it evolves, the frequent revisions are essential. Think about investments with a longer-term mindset, the transition takes, it's not a sprint. It's a marathon. But obviously, we all have to be on that journey together. So that.

Fantastic. Thank you. Well, thank you, and I've taken 2 extra minutes of your time. I apologize. We covered a lot today. If you have any follow-up questions, please use the Contact Us widget and we'll be glad to assist. And for those who want to review anything we cover, the session has been recorded, and you'll receive a copy shortly, so you can access it on-demand at your own convenience. And finally, when we close out the webinar today, you'll be routed to our webinar survey form. We would always love to hear your feedback, so please take a few moments to complete it. Thank you very much, and have a good rest of your day.