KBR, Inc. (KBR) Earnings Call Transcript & Summary

Good afternoon, everyone. This is Sheila Kahyaoglu with the Jefferies Aerospace, Defense and Airlines Equity Research team. Thank you so much for tuning in to our inaugural ESG Summit and last in our lineup is KBR. We have the KBR team with us today. We have Byron Bright, who's President of Government Solutions; Doug Kelly, President of Technology; and Adam Kramer, VP of Corporate -- VP, Corporate Secretary and Sustainability. Byron is the President of the Government Solutions business since June 2020, having previously led the U.S. division since May 2017 and now being the sponsor of KBR's ASPIRE Group for Diversity Development. Doug is the President of the Technology segment, having assumed the role in September 2019 and being responsible for the Technology Licensing business. And Adam joined KBR in 2006 and is now Vice President of Corporate Secretary and Sustainability responsible for KBR's Global Sustainability Strategy Implementation. Thanks, guys, for being here with us, and I'm going to throw about 25 questions to you guys in 45 minutes. So we'll see how many get there.

So maybe to kick it off, I think KBR is one of the names where investors really associate sustainability with you all. So can you just give us some recent takes from your most recent sustainability report.

Yes. Thank you, Sheila. And first of all, just thank you and Jefferies for hosting us. I think this has been a great opportunity to tell our story. And maybe before I answer your question, just for those that don't know KBR, 30 seconds on who we are. KBR delivers science, technology and engineering solutions to governments and companies around the world. In 2021, we delivered about $7.5 billion in revenue through amazing work that our over 28,000 employees around the world. So we're a very diverse business and really helping our customers applying technology, and we'll get into some of that in the discussion. To kind of jump into your question about something from our sustainability report. For us, ESG and sustainability at KBR really core to our culture and our value and our strategy. And we believe that, that commitment to sustainability is not just about making us a better company, but it's about using our capabilities, using our expertise to help customers reached their own sustainability goals, which creates business value for us and for them. And just to take away from our sustainability report, you'll see in there, about 30% of our 2020 revenue is tied to record to sustainability. So we're -- it's a revenue-generating part of our business, quite large. And that includes contracts where we're doing earth science for NASA or we're delivering carbon capture and energy efficiency solutions or advancing technologies around the hydrogen energy future. I'm sure Doug can dive into some of that. We have a tagline in KBR that we call kind of Zero Harm, Encourage to Care. And that was really the central point of our ESG journey and it's really about taking care of our people and if you take care of your people and value safety kind of value the people. And over -- since we introduced that platform, we reduced safety incidents almost 80%. And we've expanded that Zero Harm to really have 10 pillars around social and environmental issues. And one of those many pillars is inclusion and diversity. And today, as part of our Board, we have a very diverse board, 33% women, 33% diverse members. We've achieved carbon neutrality in the second connected year. And as Adam will tell you, on the governance side of the ESG we tied a meaningful proportion of our executive team compensation to achieving these objectives. So really, the takeaway is there's a lot in that report, it's quite big. We're very, very proud of it. Adam put a lot of time and pulling that all together. But we are is what we do. ESG has been part of us.

Great. And maybe you could talk about how large your ESG franchises and what types of work are included in there?

Sure. So I'll talk a little bit. I mean, as I mentioned, 30% of that revenue comes through on the environmental side versus [indiscernible] side and sustainability. But on the government side, I'll start and then hand over to you, Doug, maybe to talk a little bit about your portfolio. But in my portfolio, it's really about earth science is where a lot of the revenue comes through. We support NASA, and NOAA, U.S. Geological Survey. We fly all of the Earth observation satellite for NASA. We have people sitting console flying those satellites that are looking for rain and snow and taking climate readings. We then take that data that comes down to a data center. We run the data center. We have data scientists and climate specialists who analyze that data and develop data products. So a lot of what we do on the government side is really in that science and earth science research and operations, particularly as it relates to space and data and providing our products to our customers. Doug, do you want to talk a little bit about maybe some of the sustainability as part of your portfolio?

Absolutely. Thank you, Byron. So in the sustainable technology business, it all starts off with our advisory consulting functions. So a lot of our clients in this space really want to go along this energy transition. They want to move more sustainable, but they really don't know what are some specific steps they need to take. And so we have a group that really of experts that really are knowledgeable about industry trends as well as technologies that are available, and they help our clients kind of map out what they need to be doing in order to reach their goals and objectives. The second part is sustainable technology is really the technology piece itself. It's the innovation, the patents, the IP, the technology and know-how that we license to our clients to have the opportunity or ability to operate using our technology. We also have engineering services associated with that offering. We have a proprietary equipment and catalysts that we offer in order to -- as part of that part of the sustainable technology business. The third area is really around digitalization. And that is applying digital tools, advanced AI in order to optimize the operations of the unit, optimize the technology and its deployment. And then the final area is integrated solutions, which is really the engineering, the construction management, the opportunity to do the detailed process engineering for the complete project to enable our clients to take what the concept and turns into reality.

And then you guys called out 10% to 12% sustainable technology revenue CAGR, which is quite impressive. What's driving this growth? And can you give us some insights to what your customers are talking about when it comes to ESG plans? Does having a clearly defined ESG strategy factor into wining business?

Yes. So maybe I'll take that one. First, so yes, it is a very strong growth business. I would like to say it was one thing that really, it's a multiple of different technologies. The one that kind of first comes to mind is really the area of ammonia. KBR is the market leader in ammonia technology. And the good thing about ammonia is it's 1-part nitrogen, 3-part hydrogen. So it doesn't contain any carbon. So the growth of ammonia for the traditional uses for fertilizer, which is definitely a good and powerful and needed thing within the world. But what we're seeing is a new use of ammonia for a fuel as used as a fuel. And as a result of that, the growth in the demand for ammonia is driving the growth and demand for new ammonia plants. Now the exciting thing about ammonia is that the traditional way of making ammonia is really using natural gas, which does have carbon in it, and it's called conventional or gray ammonia. But what KBR has done and others in this industry is really lowering the carbon footprint, making fundamental design changes that either capture the carbon or reuse the carbon and capture it within the chemical process. And so KBR's blue ammonia process can get up to 97% reduction in the carbon that previously was led out into the atmosphere, but now is captured. And then the other area that is extremely exciting is the area of what's called green hydrogen, which is not using natural gas at all, has no carbon, uses water, the electrolysis of water to create the hydrogen and uses air separation units to create the nitrogen and then the KBR reformer puts those molecules together and create ammonia with no zero carbon footprint. So that's just one of several areas that's particularly exciting and it's growing and fueling the growth of sustainable technology business.

Maybe talk about the efforts being made in energy transition, what your involvement in things like hydrogen as carbon capture renewables?

Yes. So that's a big and growing area. I think the ammonia that I talked about is one of those areas and then green hydrogen, as we've talked about, we're using electrolysis. But in addition, we have extensive experience in those processes that are in place today, generating a lot of carbon dioxide. And so we're doing projects around the world to be able to capture that CO2, the carbon out of the atmosphere and do productive things with it. One of the things is sequestering it back into the ground. We're using it for enhanced oil recovery. But what we're looking at now is how do we utilize that carbon to produce other valuable chemicals such as methanol or apply it into cement. And so it's not only the capture, the carbon capture piece, but it's how do you utilize the carbon in a responsible way. And we have technologies and capabilities and expertise in all of those areas to help our clients meet those objectives.

Yes. If I could add on. On the government side, we've really been building out our advisory and consulting services arm. Last year, we purchased a company called Frazer-Nash in the U.K., really high-end expertise across a lot of fronts infrastructure, energy, defense. But they also have some pretty high-end advisory capabilities around wind farms and renewables, particularly in the U.K. market. So we've really been leveraging that partnership inside of KBR kind of combining our sustainable tech with our government kind of customer knowledge to help at the policy level, Doug's team, our team have done white papers for Singapore, for U.K. Ministry of Defence to help them start to think about their own kind of environmental plans and [ what are the ] transition needs. And I think we continue to see that advisory consulting arm would be another really exciting and growing area of our business.

How do you think about some of these opportunities and the maturity levels of them and how they translate into winning business? How would you define your position versus what some of your peers might be doing?

Like the way I position it sometimes in forums like this or with our potential clients as we were doing sustainability and really focused on sustainability technologies before it was cool. And so in the early days, and it was really driven by our CEO, Stuart Bradie. He really had a heart for sustainability and a heart for really making a difference in the community. So strategically from the very top level we set out on this journey to really add technologies to our portfolio that would help make a difference in -- for our clients and not only for our clients, but profitable differences for them, for us that would make a positive impact on our environment. One of the most recent things I'm excited about is the relationship we have with Mura Technologies. Mura has a plastic recycling technology. The most common way to recycle plastics is through a way called pyrolysis. And it's basically you just put the plastic in and you heat it up to over 1,000 degrees and you break those plastics down into their components. They can then be recycled and reused to make additional polymers. So when I took over the leadership of the technology business, I said there has to be a better way. And so I challenge my team to really go out and find another way of doing that, that's not as carbon intensity that produces better yields and they found this company called Mura Technologies. And what they do is use a different approach. It's called super critical water, basically, high-temperature, high-pressure water. And you heat it up, it doesn't have to be as high a temperature and the water imparts the energy to the plastics and it breaks it down. The advantage to that is it doesn't take as much energy. In fact, we recycle the water. We've got warm water that comes out and hot water that comes out back to the front of the process again. So it's minimal energy intensity, lower carbon footprint, and it doesn't produce the char that pyrolysis does. So it produces a higher yield of usable products that then go into the recycle. And the third really huge advantages the ability to take mixed plastics. So some of those single-use plastics that other technologies can't recycle. This technology can. And so we signed an exclusive alliance with Mura about 2 years ago. And since that time, we've licensed 3 licenses. We have several studies ongoing. And we really think that this technology that we're offering to our clients is going to make a significant difference and is really a strong and growing business for us going forward.

Maybe can you talk about a little bit on the projects you have going on? You're working with the U.K. Ministry of Defence when developing a net zero road map. What are the outcomes of this and what types of consulting do you work on a project like that?

Yes. That's one of the case studies we put in our sustainability report. And as I said, we've been building out that kind of consulting franchise. And several years ago, we were writing white paper to the MoD just kind of advising them on final change and really trying to be an advocate for that case for change. But the U.K. government was one of the first large economies to pass laws that committed to net zero emissions by 2050. And obviously, MoD is one of their largest footprints. And as a follow-on to some of the white papers and studies last year, we had about a 6-month engagement where we work directly with the defense infrastructure organization, really helping them map out how they attack this. And looking at things like fuel and waste and circular economy. And really, at this stage of the game, and I think all governments and really all militaries in the world are really struggling with how do we meet the mission of the military and do that in a responsible way. And sometimes those things are counterintuitive. But we're really helping them build a framework on where they can first measure what they're already doing. There's a lot of things that the U.K. MoD has done very well, particularly around their states, we manage a lot of those states and those facilities. And so designing in and building things to a certain standards that are more environmental friendly and more energy efficient. So first of all, measuring where they are, there's been a lot of it and then trying to -- so many initiatives on whether that's electric vehicles. I mean we're talking about moving into tactical vehicles like tanks and other things and what does that look like in the future or synthetic training to reduce the consumption of fuel and other things by not flying as many flight hours and doing it virtually on an augmented reality or looking at water consumption. And then really further out, they're starting to just now trying to think about, what's the next fuel? And is it a hydrogen economy, as Doug said, and how does the military engage. So at this point in the game, it's a lot of just advising and technical consulting using our deep domain expertise and really helping them lay out on a time-based road map that marks them along this journey of 2050. And I think by having some of the combined expertise we have, we can really bring some thought leadership to them.

Yes. If I could add in there, having this -- I mean, this is really a gift for KBR. Having all this work in the U.K., the buyers talking about our work in Australia. This has been helping us from an ESG standpoint of creating that net zero strategy. So now we have developed -- we have a climate security advisory team. So that strengthens our kind of climate resilient plans and then that's something we look at offering to that same services basically to our clients. So it really helps develop that business. And that's just by having that great business that we have that buyers talked about in the U.K. and the Australian work that we're doing.

Can you talk about the U.S. DoD work as well? What are you doing with the U.S. DoD to accelerate the green transition from the U.S. military in terms of them being a large consumer of fuel?

Yes. I mean I think the U.S. military is probably behind. I think for the first time ever, I'm really excited they come out and said that climate change is a national security priority. That's a pretty big statement, and they're really strategically rethinking all aspects of their infrastructure. Today, we provide a lot of facility services around the world, particularly to the Navy in places like Africa, Bahrain and Diego Garcia. And so our personal efforts are on those contracts where we can -- is to change out any kind of system that's inefficient. So maybe moving from diesel -- small diesel engines that are powering small generators or lights, whatever, even the solar power replacing a lot of the maintenance structure and the things that you might see around the U.S. based with electric vehicles. And so all of these kind of infrastructure, small actions really make a difference. On a bigger scale, we really are experts in research and development, and we support a lot of aerospace and defense programs. And one of our programs, we did actually a number of years ago is where we were testing out new biofuels for aviation. And the project was called Green Hornet and where we actually flew an F-18 that have been modified to operate on a biofuel. And again, I think that's the level where when the U.S. military is right now. They've got a long ways to go. They have such a large infrastructure of equipment and vehicles that are based around a fuel economy that is going to take a very, very long time. And the KBR's role is really, really diverse, whether that's in some of these R&D programs like the F-18 Green Hornet or in some of the infrastructure work we do. And -- but we are our customer. We are embedded in them on many mission sets, and we try to constantly advise them and provided them with or we can make a difference, where they can make a difference in meeting their long-term goal.

In terms of another case study you called out in the sustainability report, it was the North Western Project Alliance Climate Assessment. What was the workload involved there? And can you talk about the outcomes for a client looking to assess the risk of climate change?

Yes. In Australia, we have a couple of businesses in Australia, and one of them is a really high-end engineering infrastructure business, where we do large projects on the engineering side, not the construction side. We do the early design, the concept design for railways, roads, bridges, water, wastewater. Some of these projects total installed costs getting quite large in the hundreds of millions of dollars. And I think Australia, as Adam was saying, is very progressive in their view of the environment compared to some other nations and the North Western Project Alliance, they really understand and they ask us to do a first-risk assessment of what happens with sea level rise. What happens with weather systems and storms coming through? And so we did that risk assessment for them and then applied that risk assessment in the conceptual design so that we could then implement various mitigations on whether that's different types of landscaping and plants and natural materials to handle the higher volumes, water runoff and those types of things or just selecting environmentally friendly building materials and trying to build in a more environmental friendly way. The goal of this partnership with the Australian Project Alliance is that these projects are so costly and they need to last for so long. It's really building that resilient infrastructure that can withstand all these weather events and climate events that they're kind of expecting and some of these adoption will last for 15 and longer years. And so really thinking early about the design and so the kind of direct work that KBR does and we have environmental engineers. We have design engineers and then materials engineers that are working directly embedded with these very large project teams to do that early thinking, early consulting design.

Can you talk a little bit about the climate change arm and some of the research going forward with not only Australia, obviously, but NOAA, NASA and the U.S. Geological Survey?

Sure. We -- as I mentioned in my opening, we have a pretty broad portfolio there. I think maybe kind of point out one of the ones that we're really excited about, which is our work we do over at the Earth Resources Observation and Science in U.S. and the U.S. Geological Survey. That's where they really study long-term land change. I mentioned this is where they are downloading the data primarily from the Landsat satellites and have petabytes and petabytes of data that they've held for years and they really can provide now these time phase data projects and look for land management and natural resource management around the world and combine with KBR provides the data scientists, the IT specialists, the software developers to run that data center and develop these projects. And it really is the world's largest collection of images, and it's open source for countries around the world to use and get those data products, literally tens of millions of satellite images. And what's really exciting in that world today is taking some of our expertise in data and starting to fuse that data from multiple sources and taking satellite data, and maybe other data collected on the ground or thermal data or different type of sensors and layering that into new data projects and then seeing how things change over time which really give a new insight into researchers and policymakers about how to make decisions in the land use planning [indiscernible] Again, on the NASA's side, constantly evolving technologies and sensors in various technologies around the world. And then we run some programs where we're looking at seismic activity and changes in seismic activity. For NOAA and U.S. Geological Survey, we actually have to go out in the field and manage those sensors and collect that data. So it's really a very important work. And I think what really makes people want to come work for KBR because it's things that matter and really impacts and changes our world.

And maybe this one for Doug. How do you think about managing the supplier and customer base in the technology division? What are you doing -- where you're doing a lot of licensing and handling clients in areas like refining petrochemical? What is -- how does ESG tied into these industries?

A very good question, Sheila, because some of these industries aren't considered, they're not the first companies you think about when you think about sustainability, especially like refining. And so we consider our clients really our partners in this journey around energy transition and the move towards sustainability. So if you look at refinery, the market right now, you see regularly in the press that this refinery is shutting down or that refinery shutting down. But what we see is there are refiners that are remaining, but they're undergoing a transition right now. They're moving from fuels producers to becoming more petrochemical feedstock producers. And so our technologies are allowing them to make that change in a lower energy way with a lower carbon footprint. And so we really are partnering very closely with the refiners and with the refineries that are left that are going to be remaining that are critical to the overall industry and helping them in areas of like electrification, so not using carbon fuels. And Byron mentioned earlier, sustainable aviation fuel. I think there's a big push and a big need to move from traditional crude oil fuel sources to more biomass type sources, second-generation ethanol to fuels. And so we continue to expand our portfolio of technology offerings. We continue to expand our capabilities. We continue to innovate in these areas to help refiners make that transition. And similarly, in just basic chemicals, the biomass, the chemicals movement and new technologies and new developments are coming out every day. And so we're very much in tune with what's happening in that space. We're doing our own R&D. And so what KBR is particularly good at is taking these concepts and these chemistry and the pilot plant types level and commercializing it, scaling it up and being able to deliver this into full projects. That's what we do really well at KBR, and that's a critical need as all these great ideas, [ percolate data ], how do we actually make them a reality. And that's what we're doing with our clients right now. And then you mentioned coal. So we don't directly have coal technologies. But what we do is we have coal reduction technologies. So I was just in Japan last week, and I was meeting with engineering companies there and clients like Tokyo Gas and others and meeting with some of the Japanese government representatives. And they're really -- they signed the Paris Accord Agreements. But with the current amount of coal they're using to generate electricity, they're never going to get there doing what they've historically done. So we're working with key Japanese thought leaders on how do they introduce in co-fire coal with ammonia. In other words, reduce the coal needed, adding in the ammonia, which is a carbon-free fuel in order to meet their Paris Accord Agreements. So particularly exciting area for us as we partner with thought leaders and partner with industries and leaders in these industries that are historically not known for their sustainable offering. So it's really -- like I said, it's a really dynamic industry right now.

Then I want to touch upon each of the factors for ESG. On environmental, which we've been talking about, of course, you achieved neutrality in 2019. The first step towards your net zero goal by 2030. Can you give us a high-level road map to get to this by 2030?

Adam, you want to take that?

Sure, I'm going to take myself off on mute. Clearly. So yes, we are very excited. We're one of the first in our peer group to get to carbon neutrality in 2019. But yes, that's only the first step. Obviously, you have to lay the foundation for really getting accurate, auditable GHG emissions data, and that's really by improving our systems and processes for submission to science-based target initiatives for verification really near and long term. So in parallel, we rolled out our sustainability pillars focusing the business on key environmental topics that support climate change, mitigation. And then our business leaders are incentivized to manage the business to produce direct GHG emissions, both Scope 1 and 2 and across our material indirect areas of high GHG emissions such as, for example, business travel. And they do this via improved policies and procedures. So that's in sustainability awareness programs and targeted reduction initiatives throughout.

That's great, Adam. And how do you think about sustainability of those reductions over the pandemic as business travel comes back? I know Doug is traveling, but how do you think about your biggest areas of focus there?

So look, the pandemic was an awful thing that happened, but the pandemic, of course, contributed to reductions in certain emission categories such as business travel. But most recent research has provided interestingly enough that the format for calculating GHG emissions from, for example, working from home. So as you know, KBR is really focused on ensuring we're working in the best environment for our people to ensure the most productivity and the most happiness from our employees. So the work for home example, we may have increased emissions in those areas, so we have to look at that. So we're deliberately discounting the COVID years from our baseline calculations. Because they really don't represent genuine long-term reductions from improved business practices. And really, our biggest focus area is really firstly, on reducing our own direct power consumption by, for example, switching to renewable energy with an aim to achieving 100% renewable energy for Scope 2. And then at least this year, we're really focusing on purchased goods [ correlate ] at the corporate level and services category to improve procurement practices and really incentivize some of that low carbon alternative product and services.

Great. And switching gears to the social element a little bit. You guys are in a consulting services business model. So how do you think about retaining talents and especially at a time when labor is pretty tight and how does KBR stack up as an employer of choice?

Yes. I mean I think I've never seen the market like it is, where it's such a disruptive change coming out of COVID and great resignation and all the things you hear. But I think for us, it really starts in our core values of really valuing people and caring about them and bringing in these diverse ideas. But I think what makes people come to KBR is that ESG is just not something we just started doing. I mean, as Doug said, we were doing it from school. And it's really part of who we are. And kind of our vision statement is to do things that matter and it will impact and change the world. And we really focused on bringing in that best and brightest. And people come to work at KBR because they're doing things that are challenging. I mean how many times do you get to work with a company that's [ nearly implying as base station ] or developing something that's going to recycle plastic in an efficient way. It's just amazing things that are happening every day. And I think creating that environment where we treat people as unique individuals and we try to meet them where they are. As Adam was saying, we've really embraced this new way of working and methods of working and really being flexible and agile. A lot of times we are embedded with our customers and therefore, we have to be on their sites and we work within their environment. And that's great, too. But where we can, we've really changed how we think all come, think about that employee experience because we have options and have choices. And I think we're very proud of who we are. We've won several awards recently, a great place to work and those kind of things. I think just having that kind of inclusive diverse leadership with a mission that really gets you excited every day is what's making the difference for us.

Yes -- sorry to add. I want to say that I think originally, when you talk about the work from home and that flexibility, there was a gut reaction, let's get people back in the offices. And I think there are some companies that have done that, but I think it's shortsighted. You see a lot of articles coming out and saying, well, look, there's a lot of people that are commuting an hour to work, an hour back, that's a sustainability, that's a happiness. That's mental health. And so it's really amazing that Byron, Doug and the leadership at KBR, and Stuart was really just thinking ahead and say, look, the old way is you had to come into the office and do the work but realizing not everybody necessarily is doing the best work at the office. We're able to do that from work-from-home and work from environments and allow for more productivity. And we have seen greater productivity from allowing that flexibility and greater increase in happiness.

And I would say, Sheila, I would say -- sorry, I would say just to add on to that, that what we are seeing is people want connection, right? And we have a lot of employee resource groups that have improved. We have them before COVID, we added to that, and we really are using that as a way to really help connect people.

Switching gears from the employees to maybe the Board. How do you think about diversity at the Board on the executive leadership level? Can you talk about the importance there and how KBR thinks about diversity at a firm-wide level?

Absolutely. So if you look at our Board leadership level, we have increased that, as Byron mentioned, we're 1/3 diverse, a 1/3 female candidates at the Board level. But the Board and our Chairman of the Board is the first candidate, Les Lyles. He and the Board have really tackled the issue of diversity, realizing its first and foremost, very important that you're not just kind of going through the motions and getting diversity at lower levels. It's leadership. It's having people understand that you can go all the way to the top of the Board level with -- and no matter your background. And so that's kind of what the desire is for the Board is showing that inclusivity. It's giving people a seat at the table, not just getting diversity for diversity's sake but really leading through example, and we aren't really stopping at the Board and the executive leadership team, we've actually flown through diversity and inclusion throughout our recruiting efforts. So really looking at that for the last several years improving upon that. And our investors, for example, they ask for our EEO-1 forms to be published to show the data to show accountability. And we've done that. And so we're being transparent. We're showing what we're doing, and that's really the best thing we can do right now.

And when it comes to the Board, I mean, really, if you watched KBR over the last several years, it's been a very responsible and methodical shaping of the Board to match our business. Our business has transformed tremendously in the last 5 or 6 years through both on acquisitions that we have done or just really exciting dynamic market that Doug operates in. And so we have a board that represents that. We have high-level general officer. We have executives from other aerospace and defense firms. We have international representation on our Board. And it's just -- I think the quality of that Board, some are just amazing experts in finance or so social. And they're active and they're engaged and they're approachable. And we really feel our Board is an extension of our executive team and they add a tremendous amount of advice and value as we make pretty big decisions as our world changes. And I think it's been a really exciting time to see our Board really come together and they like each other and they have fun together. And I think it's just it's a really new experience.

You mentioned acquisitions. And just given your acquisitive nature, how do you guys keep the culture of the company consistent as you add new pieces to the portfolio?

That is probably the #1 criteria when we make a decision to acquire. Is there a -- is there a complementary culture? And we really go in and we say, let's not have the arrogance of the acquirer. We try to be humble. We're buying -- we don't buy broken companies. That's not what we do. We've got to turn around kind of firms, we go and find companies that give us synergy where 1 plus 1 equals 3 or greater. And how do we bring them in and learn about them. And I can give you an example after example, where we've acquired a company and something they were doing better than we were doing. So we adopted that process in how we do our business, and it just makes us a better company. So it's hard to do, to be very disciplined. We've walked away from deals where we just felt like that management team is not going to stay around. They don't have the same values as us. They're great business, and there's nothing wrong with what they're doing. They just didn't align to our values. And so -- we spend a lot of time on the front end here in that due diligence trying to know them as people and build that trust. And it's just that it's been a huge part of our success in all the acquisitions.

Maybe switching over to governance. How is ESG factored and measured into executive comp?

So ESG, and you look at our proxy, it's part of our incentive program, so our short-term incentive program. And this was something that over the last 2 years, we've actually added to our short-term incentive program. And we look at all the factors in the ESG. We've been talking a lot, I think, about carbon emission reduction, and that's one factor of ESG. But if you look at -- there's a lot of rating companies, and I'm sure a lot of people on this call look at those ratings to see how companies are doing kind of an apples-to-apples comparison. So those ratings, they look at the -- actually, the social and the governance are the biggest factor for us, just because we're not a carbon-intensive business such as some of the oil and gas companies and whatnot. So those are the factors that stand out. And those are the factors we put a bit more emphasis on. As you look at our carbon -- look, we're carbon neutral for the last 2 years. We've made a commitment going forward. We have a 2030 net zero campaign. We're well ahead of the game, kind of we're top in our class in our peer group. So the S and the G has a lot of focus in that incentive program. And that as time progresses, we don't have specific set goals because I think that's difficult right now with the early analysis of sort of the data and how other companies are doing comparison [indiscernible] But as time progresses, we intend to focus more on objective targets as we get more reportable data than that.

That's great. And in terms of -- you have this -- you have the sustainability and corporate responsibility for committee on the Board, how does the team effect change within the organization? And what types of measurements are you tracking due to determine success?

Yes. So I guess that's kind of 2 parts. So look, ESG is firmly within our strategy. Unlike most companies, we actually have an ESG's specific committee at the Board level. And this is like Byron and Doug have mentioned, this is not just yesterday we set this up. We've had this committee for many years before ESG became sort of the hot topic that is today. And if you look at it, we've been doing an ESG report for about 8 years now. So sustainability and corporate responsibility at the Board level, they oversee the sustainability strategy and they ensure that ESG sustainable is embedded in every aspect of our business practices. So from our Zero Harm Culture, through to the rigorous adherence to our COBC by contractors, subcontractors, suppliers, et cetera. So if you look at how that's really affected that really developing it throughout our organization. So we have a global sustainability committee that's made up of employees and key business leaders, and that basically works closely with the strategy developed at the Board level and basically develops programs and initiatives to support those goals. But at KBR, and it's kind of like, I don't know, Steve Jobs had a quote that company is run by committees is run by individuals. So KBR, we also -- we empower our individuals to work toward the ESG goals without kind of being micromanaged by committee. So it's really empowering those individuals, and we believe this is important to affect the ESG quickly and with success. So together, these groups, along with key stakeholders, we have several meetings here just talking to employees, investors, really identifying material ESG topics and then those are flowed through our sustainability report, you can see this. And from each of those, these material areas we collect the data and set up sustainability key performance indicators to measure that progress towards the strategic goals set at that Board level.

And maybe last one to wrap it up, guys. You've done a great job talking about all the elements of ESG. What are 3 takeaways we want everybody to walk away with when it comes to KBR on the ESG opportunities?

I'll start. And I guess for me, I just want to thank Sheila for hosting this. Mostly it's very important the conference all day as a lot of companies are doing a lot of great things, but I want investors to walk away and see that KBR is a company that does what we say we're going to do it. And I think having real-world work, having credibility, being authentic, that's really important to us. It's not just trying to meet some metrics somewhere. It's really about doing work that matters. It's going to create a safe, more secure, more sustainable world for the communities where we live and work. It really diverse portfolio of science, technology, customers, geographies and ESG is integrated into our way of life and our way of doing business. And I hope hopefully tried to demonstrate that in the short amount of time and I was fast and furious that are some of the projects and strategies and programs that we have. And we're just really proud of that. And we believe that if we're doing the right thing, it's not just the right thing to do, it's also good for business. And as we are talking earlier, a lot of what we do is revenue generating, and we're a little proud of that journey, really proud to help our customers go on that during all the way together. Doug?

Yes. I think to add to that, very well said, Byron, agree with all of that. I think it's -- the other piece is as we look at the dynamics and the rapid changes in the industries that we serve, I think the key thing is that one answer is not going to solve everything. And so I think there's going to be multiple technologies. There may be multiple solutions. It's going to require innovation, not only at KBR, but through our strategic partnerships that we have. So we're really looking and really humble enough to know that the answers aren't going to all be with KBR. We're going to look at key alliance partners and key people in the industry and thought leaders to put together solutions that really make a difference in this space in ESG. And so I'm very excited about -- to be part of KBR and to be part of how we're contributing and making a difference in the world.

Okay. Well, thank you, guys. Thank you all for participating, and thank you for telling us a little bit more about the KBR story. We appreciate it, and we appreciate everybody tuning in. Thank you.

Thank you. Appreciate it.