Lendlease Group (LLC) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by, and welcome to the Lendlease Sustainability Market Briefing. [Operator Instructions] I must advise you that this call is being recorded today, Wednesday, the 3rd of November 2021. I will now hand the call over to Justin McCarthy, Head of Investor Relations.

Thank you, and good morning, everyone, and welcome to our Third Annual Sustainability Market Briefing. My name is Justin McCarthy, Head of Investor Relations for Lendlease. Last year, we shared with you our industry-leading sustainability targets. This year, we'll share the significant progress that we've made in working towards achieving them. We'll also demonstrate the operationalization and integration of our targets across the group, including insights into our supply chain and procurement function. At the end of the presentation, you'll have the opportunity to ask questions. We'll have 4 speakers today: Cate Harris, Group Head of Sustainability and Lendlease Foundation; Simon Wild, Head of Sustainability Transformation; Edmund McCombs, Head of External Partnerships; and Peter Bounsall, Head of Supply Chain and Procurement. And we'll start with Cate.

Thanks, Justin, and good morning, everyone. Moving to Slide 3. Today, working from my home in Melbourne, I'm on the land of the Wurundjeri People of the Kulin Nation, whilst my colleagues in our officers in Barangaroo are on the land of the Gadigal People of the Eora Nation. I would like to acknowledge and pay my respect to their Elders, both past and present. I would also like to acknowledge all First Nations peoples from across Australia. As a business that works across many locations, we have a responsibility to listen, learn and walk alongside First Nations peoples to ensure our activities support the ongoing continuation of connection to their land, waters, culture, traditions and languages. Moving to Slide 4. With the commencement of the COP26 in Glasgow this week, we have been reminded of some fairly sobering remarks from our world leaders about the plight of our planet and climate and the urgent need to turn words into action. So I am pleased to present today some positive outcomes from the action that we have been undertaking across our business globally this past year, driven by our bold, industry-leading sustainability targets that we launched in August 2020. There are some highlights depicted on the slide that we are very proud of, including the launch of our Mission Zero campaign to communicate our zero-carbon targets and ambition and associated actions and our A+ ranking awarded by the PRI. We will delve deeper into a number of the other achievements throughout the presentation, including our GRESB results, which, turning to Slide 5, I would like to acknowledge the amazing work of our investment management business, as reflected in the outstanding results from the recently announced GRESB ratings. In a year that saw GRESB participation increase by 24% to USD 5.7 trillion in assets under management across 1,520 participants, 4 Lendlease-managed funds were assessed in the GRESB global top 10, including LLITST, which scored the first 100% rating. Turning to Slide 6. In the strategy update to the market on 30th of August 2021, sustainability was reaffirmed as core to the Lendlease culture, strategy and purpose. We have a long-standing commitment to leading the evolution of our industry to be truly sustainable, environmentally, socially and economically, and we have set measurable targets to drive our triple bottom line focus. On Slide 7, we see that the Lendlease sustainability strategy is guided by our framework and 2 bold targets, one environmental and one social. Lendlease has had a sustainability framework in place since 2009. In 2019, it was updated, and last year, new targets were set as the measurable objectives that complete our sustainability framework and provide a focused call to action across our organization globally. Turning to Slide 8, a reminder of the bold ambition that Lendlease has committed to, our industry-leading targets, our call to action. Lendlease is a 1.5-degree-aligned company. We have set ourselves ambitious, science-based emissions reduction targets. By 2025, we will reduce greenhouse gas emissions as far as possible with the remainder offset in an improved carbon-offset scheme. Our net-zero target applies to our Scope 1 and Scope 2 emissions. By 2040, we are aiming for no greenhouse gas emissions from our business activities. That means no offsets. Our absolute zero target applies to our Scope 1, 2 and 3 carbon emissions. We also aim to create $250 million of social value by 2025, beyond our project and asset obligations, created through our corporate shared value partnerships we support through the Lendlease Foundation. It has been a year since we launched our industry-leading environmental and social sustainability targets, and we are pleased to report we have already made meaningful progress. Our journey has given us greater conviction around the importance of our mission and that collaboration is key to achieving the industry transformation that will be necessary to tackle climate change head on. There are a number of highlights we look forward to sharing with you today. Moving to Slide 9. As you may recall from last year, with the launch of our environmental targets, rather than just stating our ambition, we outlined a 5-step plan to turn our aspiration into action. We've had a number of success stories from our journey and progress in FY '21, some of which we will share today. The clarity from our 5-step pathway facilitated the development of our regional Mission Zero road maps this year. They set out specific regional strategies and time frames to eliminate Scope 1, 2 and 3 emissions, which align with our target milestones. Our road maps have adapted to regional availability of renewable fuel options, renewable energy markets, technology, the maturity of the supply chain as well as government policy. These plans have been developed by the business for the business. They provide the next level of detail to drive specific and timely action towards our targets, along with providing another measure of our performance. The appendix to this presentation has some additional ESG highlights that we would like to share but just don't have the time to cover off. But to tell you more about our 1.5-degree-aligned progress, I will now hand over to Simon Wild.

Thanks, Cate, and hi, everyone. My name is Simon Wild. I'm the Head of Sustainability Transformation for Lendlease. I lead our TCFD and decarbonization strategy across our global operations. Turning to Slide 11. We made progress in FY '21 to reduce our Scope 1 and 2 emissions. In addition to the decarbonization activities taken in FY '21, the sale of the Engineering business and the ongoing impact of COVID significantly impacted our emissions. We were 29% under our 1.5-degree-aligned trajectory for Scope 1 and 2 emissions. This places us in a good position to achieve our target of Absolute Zero by 2040. In addition, we also offset 23% of our Scope 1 and 2 emissions. As a result, we are well on our way to offsetting 100% of our residual carbon emissions to achieve net-zero carbon by 2025. Some key Scope 1 decarbonization actions taken in FY '21 include a successful renewable diesel pilots across a number of our U.K. projects with 60% of our U.K. projects now using renewable diesel. This led to the launch of an alternative fuel policy across the U.K. business with liquid fossil fuels no longer accepted on any new construction project with existing projects needing to comply by 2020 -- by January 2022. Highlighting the use of electric excavators on projects such as Manchester Town Hall restoration, where we saved 9 tonnes of CO2 by using electric excavators, the equivalent of around 10 passengers flying from London to New York; the design and delivery of all=electric buildings, including Sydney Metro Victoria Crossover Station Development; Sherwin Rise retirement living villas; MIND in Italy; 30 Van Ness in San Francisco; and our U.S. residential community at Fort Campbell. In FY '21, we moved to market-based method for Scope 2 emission calculations and gross scope 2 emissions disclosed are after the purchase of renewable electricity certificates, power purchase agreements and green power. Electricity consumed by the assets managed across our investment platform is the largest contributor to our Scope 1 and 2 emissions. Our plans to increase the purchase of renewable electricity to achieve our target of 100% renewable electricity by 2030 should significantly reduce Scope 2 carbon emissions. While Scope 1 and 2 emissions are our immediate focus, we have increased our engagement and collaboration across the real estate sector to address our Scope 3 emissions. Turning to Slide 12. In FY '21, the business made significant progress towards 100% renewable electricity by 2030, reaching 30% of electricity from renewable sources. Project-related initiatives have contributed to reducing electricity use, and increasing renewable electricity in FY '21 include continued deployment of energy efficiency measures and upgrades to plant and equipment. Construction business in Australia switched to 100% renewable electricity from January 2021. The Australian Prime Property Fund Industrial signed an agreement to deliver a renewable energy program for up to AUD 20 million. 2 megawatts of integrated solar power systems have been implemented across the APPF commercial portfolio. All Chicago construction projects are utilizing 100% renewable electricity. And MIND Milan Innovation District will be powered only by renewable sources. Turning to Slide 13. I'm pleased to share with you today the upcoming release of our new ESG data book containing our full FY '21 and historic sustainability disclosures, which will be available in mid-November. The new ESG data book will provide some additional features and functionality; including data split by construction and real estate; energy and emission intensities; interactive graph functionality; a one-stop shop for our TCFD disclosures; and finally, our first Scope 3 carbon emission estimate. In the next 2 weeks, we plan to reach out to a number of you with a survey seeking your feedback and views on ESG disclosure to help inform our disclosure strategy and approach moving forward. The last time we reached out to you in this way, we received valuable insights that ultimately helped shape our sustainability framework. So please stay tuned for further information over the coming weeks, and also thank you in advance for your participation. Moving to Slide 14. This year, we continue to evolve our response to the TCFD framework. In particular, we continued our strategic resiliency work, assessing the climate-related resiliency of our business to the climate-related impacts we identified in FY '20 across our 3 climate scenarios. Continuing our by the business, for the business approach to TCFD, over 100 senior leaders were asked to identify positive and negative sensitivities to each climate-related impact; what actions we would need to take if the impact materialized; and finally, what the residual sensitivity would be if the actions were taken. The residual sensitivities for the first 5 CRIs were included in the FY '21 annual report and will also be in the upcoming ESG data book. Finally, I'm pleased to share that our FY '21 TCFD disclosures were included in the recent TCFD Secretariat's 2021 status report as a strategic resilience disclosure case study. I will now hand over to Edmund to provide an update on progress towards our social value target.

Thank you, Simon, and good morning, everyone. My name is Edmund McCombs, and I'm the Head of External Partnerships at Lendlease. Turning to Slide 16. Social value is created when an activity generates a positive contribution to an individual's quality of life or improves the resiliency of a community. These activities could include supporting health and well-being, providing economic opportunities, creating a sense of community or even improving the local environment. Social sustainability has always been a priority for Lendlease, whether it be through the development of skilling and training centers, creating spaces that foster a sense of connection or proactively promoting and supporting positive health and well-being outcomes. We are on an exciting journey to leverage our shared value partnerships, supported through the Lendlease Foundation, to create $250 million of social value by 2025. In spite of the impact of COVID-19 on our ability to activate and volunteer with a number of our partners, we have assessed more than $47 million or 18.9% of our social value-creation target from 8 of our shared value partnerships, and additional 14 partnerships are currently undergoing assessment. Turning to Slide 17. As with our 1.5-degree-aligned target and 5-step pathway, we also announced a 4-step pathway towards creating and measuring our social value across our organization in conjunction with the launch of our social value target. While we have made progress on all 4 steps, which we outlined in our annual report, today, I will focus on what we have undertaken, specifically related to steps 2 and 4. Moving to Slide 18. To accurately measure the social value being created through our shared value partnerships, we are working with accredited social return on investment, or SROI consultants Think Impact and Social Impact to assess and verify our efforts. The methodology used combines the principles of SROI with a cost-benefit analysis to measure social value through placing an economic value or financial proxy on the improvement of well-being across a series of social outcomes. Financial proxies were used to determine the social value created across the geographies where the program took place, and this has allowed us to better understand social value creation through a cultural and country-specific lens. Turning to Slide 19. We are interested in better understanding and measuring the social value we deliver through the commitments and obligations across our projects and assets. This is separate to the social value we create through our shared value partnerships that contribute to our target. The social evaluation of our projects and assets use the principles of SROI with a cost-benefit analysis methodology based on the financial proxies from the Australian Social Value Bank and Simetrica. We believe this approach provides a simple, timely, cost-effective and robust methodology for social value creation. The Australian Social Value Bank and Simetrica use a simplified approach that leverages well-being valuation analysis to understand the average improvement in well-being created by a specific outcome. And this simplified and robust approach, we believe, will allow Lendlease to provide social value estimates for the work happening across our business in a cost-effective and timely manner and is considered best practice and endorsed by the OECD, the Organization for Economic Cooperation and Development. We have selected 6 metrics to be deployed across the business: skilling and training, employment, volunteering, mental health, housing and homelessness and diverse supplier spend. These metrics were selected based on social value-creation activities that we know are commonly delivered across our projects and assets. And while they will not account for all of the social value created, we believe it is a good starting point. Needless to say, we are really excited to be embarking on this next phase of our social value journey, having just commenced our 6-month pilot program last week, and we look forward to providing further updates in the future. It is now my pleasure to hand over to Peter Bounsall, who will discuss the integration of our sustainability targets across our supply chain.

Thank you, Edmund, and good morning, everyone. My name is Peter Bounsall, and I'm the Group Head of Supply Chain and Procurement. Turning to Slide 21. The supply chain plays a critical role in the successful delivery of our projects. We have been working closely with our sustainability colleagues to ensure our global supply chain strategy is aligned and working in unison to play our part in achieving our ambition in tackling the group's climate and social value agenda. Working collaboratively with our supply chain is essential to achieving our sustainability targets. Subsequently, our global supply chain strategy was developed with the aim to partner and innovate with suppliers to mitigate supply chain risk, unlock value and support our digital journey. Our 5 key focus areas are: knowing our suppliers and their suppliers in more detail to proactively manage risk and continue to provide the business with enhanced insights, data and information; continued development of broader and more advanced category strategies for key high-risk trades and critical supplies to provide surety of supply, mitigate geopolitical sensitivities and geographic concentration risk and provide enhancements in safety, quality and productivity; establishing the right trading partnerships to introduce low embodied carbon materials, initially for concrete, steel and aluminum. This will support our target to achieve Absolute Zero carbon by 2040, given up to 70% of our Scope 3 emissions are derived from these materials. Continue to increase spend with small-to-medium enterprises and social benefit suppliers in supporting our social sustainability target of creating $250 million social value by 2025; and and continue to work in close collaboration with our digital team to increase forward engagement with select supply chain partners, the Digital Twin design and construction plus the creation of better products more efficiently. Moving to Slide 22. Whilst the organization looks to create social value for our shared value partnerships, we are also mindful of the social impacts that can occur throughout global supply chains. A key element of the work we continue to deliver is ensuring we have plans in place to mitigate any risk of modern slavery in our supply chains. We have made some great progress, including: the launch of our supplier code of conduct, enhanced registration and screening of suppliers for the new supplier portal, the implementation of a global audit program targeting high-risk suppliers and the launch of a new e-learning module for our employees. This financial year, we are continuing to focus our efforts on increasing supply chain transparency with a phased, risk-based approach. Our priority has focused on areas with elevated modern slavery or human rights risks and strategic suppliers prioritized by category risk profiles. The Monash Centre for Financial Studies recently reviewed the disclosure quality of 99 modern slavery statements produced by ASX 100 companies for financial year 2020. A key highlight for us was being the only property company listed in the top 10 for disclosure quality, a standard we will continue striving for each reporting year. We aim to release our 2021 Modern Slavery Statement in the coming weeks, which includes a new risk-mitigation effectiveness progress scorecard. Moving to Slide 23. We are now embarking on what will be our biggest challenge yet, changing the way we procure to reduce our Scope 3 emissions. Our data to date shows that for Lendlease, 81% of our annual emissions are from upstream products and services that we purchase, of which 70% is from steel, concrete and aluminum. We expect broad-based efforts across the industry to lower our Scope 3 emissions However, large-scale changes are required to meet our longer-term targets. It is important that we make these changes now, and it includes shifting the way we do things internally within our business as well as externally with our supply chain partners. Some key actions we are taking to implement ongoing change include: Educating our business on Scope 3 emissions; utilizing our global category expertise to work with world-leading manufacturers in key areas such as aluminum, steel, cement and timber to supercharge the use of environmentally friendly construction products. A great example of this is the recent announcement of our partnership with Stora Enso, one of the world's leading suppliers of sustainable timber, joining global forums to help speed up the focus on decarbonization within construction such as SteelZero; The Materials and Embodied Carbon Leaders Alliance, MECLA; and Race to Zero; ensuring early engagement of technical consultants to inform the best structural solutions in design and move the industry towards more prefabrication and design for manufacturing assembly; implementing new ownership models such as whole-of-life across our assets to provide circular economy outcomes and access to superior equipment to drive environmental performance; and ensuring future supplier selection is based on their ability to provide innovation for carbon-intensive products. We do acknowledge that some alternative low embodied carbon materials are not yet available. Hence, continuing to work collaboratively with our supply chain partners and invest in emerging technologies will be critical success factors to help develop the right pathways to achieve Absolute Zero Carbon by 2040. I will now hand back to Justin.

Thank you, Pete. And we might open up for questions now. We have covered a lot of territory in a fairly short period of time. Hopefully, you've got some questions, and each of our 4 speakers are happy to take those now. So operator?

[Operator Instructions] Your first question comes from Tom Bodor with UBS.

I just would like to understand sort of some of these emerging sort of technologies that you said are not yet available, I suppose, in a commercial quantity like steel and cement. Is there examples of zero-carbon steel and cement that's at least available in some of those sort of community that you see coming through over the next decade? Or is it still not there yet?

Thanks for that question, Tom. I might hand to Simon in the first instance, and then Pete, if you've got anything else to add.

Thanks, Cate. So we are seeing -- from a cement perspective, we are seeing novel cements coming through that have significantly less emissions, not quite 0 yet. The -- we're sort of also seeing alternative materials, geopolymer from a concrete perspective, certainly gets emissions a lot lower and then also looking at alternative materials from a structural perspective like engineered timber to reduce the amount of cement that's needed. Pete, I don't know if you wanted to add anything.

Not too much more to add, Tom, really, other than the fact, as Simon said, that there are materials now that have significantly lower embodied carbon. And we're certainly working, as I said, with some of those world-class manufacturers in, obviously, concrete, aluminum and steel. Not quite at 0 yet, but certainly, we're looking to collaboratively liaise with those organizations as we move forward. And there may well be some investment on the Lendlease side to help with the R&D and innovation. But certainly, there are materials out there at the moment that will have a significant impact on our procurement now. So we can certainly insert some of those materials into our ongoing developmental pipeline as we speak.

Okay. So in terms of the amount less, is it sort of -- what is the magnitude? Sort of 70%, 80% less carbon? Or is it sort of half? What's the sort of magnitude? And what's the cost of those materials even just today? And I appreciate new technology, but...

So with aluminum, some of the work that we're looking at in aluminum at the moment, the impact on embodied carbon is probably around about 50% to 60%. That's also the same for some of the steel technologies that we're looking at as well. Certainly, from a cost imposed, Tom, again, it's really about us just, again, having an aggregated demand view of our pipeline. And obviously, the fact that we've got this amazing pipeline in Lendlease really helps where we can obviously work with those partnerships, and that offsets a lot of the cost imposed.

Your next question comes from Nina Wilkinson with Melior Investor Management.

Can you hear me all right?

Yes. Thanks, Nina.

I just want to ask. You committed to the Science Based Target Initiative this year, are you able to provide any update on getting your net-zero plan certified by that organization?

Thanks, Nina. Yes, Simon and the team have been working that through, and it might still be -- the work they've been delivering in this space this last 12 months. Simon, did you want to provide an update on our status there?

Yes. Sure. So we have been working through our FY '21 disclosures and a lot of sustainable finance work as well. So we are still working through, expecting that we will submit for certification within the next sort of 6 to 12 months-ish, but the intention is still to submit under SBTi for our gross emission target reduction.

Okay. Great. And a second question, if I might. Just great detail today. So thanks for talking about your transition to more sustainable building materials and also using more renewable energy in your projects. And I just wondered if you could talk to how your customers and tenants are responding to those initiatives. Is it at a point where you can attract a benefit, like a price premium for being a sustainability leader? Or is it more at the stage where being sort of green and sustainable is considered essential?

Thanks, Nina. Yes, look, I think, I mean, as you know, we've long held the belief that creating more sustainable products in built environments is a market differentiator for us and delivers the value that we seek. In terms of customers and tenants and their demand, I think it's fair to say that particularly, as we sort of come out of the pandemic, the benefits of sustainable buildings with their health benefits, their good design, their ventilation systems, their biophilic elements, et cetera, I think we're only going to see an increase in demand from tenants and customers and the like for those sorts of elements to be part and parcel of their built environments moving forward. But yes -- no, look, we continue to see positive value drivers with the delivery of more sustainable product, for sure.

Actually, a third question if it's not too chancing of me to keep going. But I just wanted to ask, I saw you got a slide at the end of your appendix on promoting biodiversity. And I completely appreciate that it's probably only an emerging area of your strategy, and it's very new for everybody. But could you give us some insight on how you're starting to approach this area and integrate it into your sort of development projects and from what stage it starts to get integrated?

Sure. Thanks, Nina. That's a great question and takes us right back to the framework itself, our sustainability strategic framework, which, obviously, biodiversity is a key component of in terms of our drivers around creating a healthy planet, healthy people. Biodiversity is a really integral part of our delivery of sustainability through the built environment. And what's really interesting is that over the last few years, we've seen a really big upswing in terms of the need and the demand and the drive to drive increased biodiversity in urban areas, particularly off the back of the strength of our urban regeneration pipeline. We're looking at ways of bringing back biodiversity into these urban areas and projects like TRX in Malaysia. We're excited about the brand-new sort of park area and natural environment elements that we'll be bringing into that project. We've had some great opportunities in Chicago with our Southbank project there to bring back a new sort of foreshore area complete with local and native planting. We've got beehives popping up all over the place, whether they're rooftop gardens, et cetera; and even, too, the work that we've been doing in terms of the research here in Sydney with the impact of planting around the efficiency of solar panels and being able to work to sort of drive research that has proven that to plant in and around solar panels actually increases the efficiency and effectiveness of the power generation there. So we've got some really, really positive stories and examples that we're looking to deploy off the back of some great work that we've been undertaking in recent times around the urban biodiversity pace. But you're right, biodiversity and natural capital are fast becoming that next sort of third pillar, if you like, of focus for our strategy moving forward We're really excited about embarking on that and have been keeping a keen eye on the emergence of a number of other programs and initiatives, some driven out of the Science Based Targets area and others driven through initiatives like the Task Force for Nature Disclosure, et cetera. So we're starting to gather all of the information at hand across the sector now to look at how we move forward and deliver a strong, strategic response to this area just as we have with our response to climate through our carbon targets, et cetera, and, obviously, our social value target. I'll just open up to the team if there were any other comments, potentially, Simon for you. Did you want to add anything further to that?

I don't think I can. I think you've covered everything.

[Operator Instructions] Your next question comes from Amy Krizanovic with Aware Super.

I appreciate the presentation today. I was also going to ask about biodiversity, so thanks for bringing that up, Nina. I guess just to add to the detail you've just provided, just keen to sort of understand what the strategy is in terms of across the entire group. Is there a sort of goal to have targets around all projects in terms of a neutral or a positive impact in terms of biodiversity on the area impacted? And would that sort of differ by region? Or is that still being developed?

Thanks, Amy. I think in short, it's something we're still developing in terms of targets and such. But certainly, when all of our projects develop sustainability management plans that respond to all areas of our strategic framework. So biodiversity is obviously a core component of that framework. So every project we undertake addresses all of those areas represented under the framework. So we are always looking at what we can do to improve the biodiversity outcomes as a result across all of our projects regardless of where they are within our global footprint and the part of the business that they're coming through. So it's always a component of the way we approach our sustainability management and delivering execution through our projects, if that answers your question, Amy.

Yes. No, that's good to hear. I guess it's -- we've heard the positive case studies that you've highlighted. But keen to sort of understand and get more disclosure as we progress in -- all of us in this area of sort of a commitment to sort of neutral or positive impact across all projects, if that is sort of possible. And I know it's sort of challenging with even just sort of information and data and experts as well but definitely an area of focus.

Yes. Definitely. I'm sure, like yourself, we're keenly watching as this all evolves through the built environment space to see what are going to be those right metrics and, ultimately, the right targets to be able to articulate then those stories and those results at the end of the day as well. So again, we'll be making sure that we're seeking feedback along the way as we develop our programs and our strategy and targets within this area to make sure that we're responding in a manner that's expected.

Just while we're waiting for some more questions to come through the line, we've had a couple e-mails. So the first one, "How does Lendlease allow for increasing sustainability in feasibility and project assessment?"

Right. I'll step in first, but then I'll hand over to Simon on the detail of this. But we've done a lot of work since announcing the targets in August last year around implementing and integrating systems and processes into all of our investment decision-making processes to make sure that we've got those key consideration points and key stopgaps and measures in place to make sure that sustainability and particularly impact against our targets and the impact of climate, et cetera, are well and truly considered and informed throughout that investment decision-making process. Simon, do you want to talk to some of the specifics or some of the key examples of what we do have in place now to help us do that?

Yes. Sure. So I'll probably use TCFD as an example. So part of looking at the risks and opportunities that emerge in that sort of medium to longer term is in our investment decision processes. We have 2 requirements. One is to test the future physical climate change risks, so looking across heat waves, sea level rise, river flood and seeing when those risks might emerge at a site level and then the appropriateness of the response in managing those risks. And then probably the other one to just mention is that we have a shadow price on carbon that we use to look at the impact of ongoing operational cost risk from the point of view of a future carbon price coming in and escalating from sort of 2030 onwards. Those are the 2 examples I'd give for that one.

Yes. And additionally, all of our investment committee papers, as a standard inclusion, need to address the risks and the opportunities of each of the focus areas of the sustainability framework. So again, really upfront, getting project teams and bid teams, et cetera, to really think through the implications of those opportunities and risks of all of those key elements of the sustainability framework, providing a much more holistic approach to the implementation of sustainability in what we do.

And then the second question was, "Does accelerating sustainability demands increase obsolescence risk?"

Sorry, could you just -- you just dropped out there for me. Could you just repeat the question?

"Does accelerating sustainability demands increase obsolescence risk?"

Yes. Look, I think for us, in terms of obsolescence risk at the moment, and there has been a lot of talk across the industry around increasing need for existing assets to be able to respond to the change in climate demands, changing expectations around sustainability performance, et cetera, I guess it doesn't necessarily change our approach in that it really actually probably just reinforces our philosophy of integrating sustainability into everything that we do and that we see that sustainable product is far less at risk of that kind of obsolescence and, in fact, helps to maintain that longer-term value in terms of creating product today that is resilient to these sorts of changes and risks and impacts moving forward. So I would suggest that our approach to sustainability has helped us mitigate that obsolescence risk as a result.

Operator, we might hand back to you to see if there's some more questions on the line.

Your next question is a follow-up from Tom Bodor with UBS.

This one might be for Justin or Cate. But I just wanted to understand what the big cost-reduction target that Tony is pursuing, does that -- how does that impact the sustainability part of the business?

Well, maybe I'll sort of address it from a very high level. So we are making good progress in terms of getting that cost out. What the teams have been asked to do, and everyone will play their role in that, all teams, including Cate, so Cate can add to things specifically. But it's really looking at becoming more efficient, stopping things that aren't quite required but making sure all the important, value-adding activities are maintained, but think a little bit differently and really trying to get the benefits of scale. Cate, you might have some specifics that you can touch on for your remit.

Yes. Look, I think to that point of sort of making sure that we're laser focused and efficient and effective in the way that we're approaching our work to keep us on track with our targets and our ambition. That's part of the surveying process we're about to undertake with some of you, is to make sure that we are laser-focused in the disclosure work that we're undertaking, et cetera, so that we can make sure that we're delivering disclosure that meets the expectations of the market but, at the same time, not taking away time and effort from actual execution of the targets out in the business and across the projects, et cetera, through spending our time on disclosures that might not have a value now within the market. So we want to make sure that we're really laser-focused and focusing our time and effort where it counts most. But the target -- so the targets -- and the targets have been adopted so well and so broadly across the business that quite often refer to the fact of -- not necessarily being sustainability targets but being the business' targets, and they are fundamental to the way we operate as an organization. So we've worked, as I said, over the last 12 months or so since launching the targets to make sure we've got all the right systems and processes in place to help the business to navigate, regardless of these other changes that are happening at the moment, to continue to navigate and support the business in delivering and executing on these targets across our pipeline, across the projects that we're bidding for and winning and delivering. So you shouldn't be seeing any impact through the process that we're undertaking at the moment. It's -- if anything, it's about just us becoming laser-focused, as I said, about what's important to make sure we execute on the targets and meet the expectations of the market in terms of our ongoing disclosure.

Your next question comes from Alison Ewings with Regnan.

And thanks for the session, in particular, the elaboration on some of those difficult Scope 3 areas. That was a question that had been on my mind as well. I've got a quick clarifier just on the scenario analysis and then a couple of supply chain questions, on slides 26 through 28 where you talk through the -- each of the scenarios in a bit more detail. I just wanted to check what time frame that coding of the residual sensitivity analysis is at. So kind of how far into the future are you starting to see or have you tested for those?

Simon, would you like to jump into that?

Yes. No problem. So when we were undertaking the analysis with the business, our scenarios are out to 2050, but we're asking the business to look in the strategic time horizon for the business, which is when they're looking at that, it's about a 10-year horizon.

That's good context and explains some of the -- where you've landed on some of those. With respect to supply chain, I was interested in some of the modern slavery statements that we've seen from others in the sector. One area that does appear to have been a bit slow is responses to this sort of omnibus questionnaire that the Property Council had convened. And I wondered if you could provide any update and reflections on this, including when there's likely to be any changes to that process. And the other question I have is with respect to the comment that you made about looking to increase the diverse supplier spend. We know over the last couple of years, Lendlease has been looking to consolidate suppliers, and that can make those sorts of strategies more difficult to implement. I was wondering how you balance the tension between those 2 objectives.

Pete, do you want to take those questions?

Absolutely, Cate. So regarding your first question about modern slavery, we're obviously a key member of the Property Council. We obviously work very closely with that organization. We probably haven't seen too many differences between the work that we've done with the PCA at this stage around modern slavery. Certainly one area that we are reliant on has been to focus some of our audit efforts into the cleaning, security areas where we would consider that to be maybe a quite high risk in terms of modern slavery. So we did undertake some significant audits in Australia this year, but we didn't find any high-risk activities in our supply chain. So we've certainly taken that on board with PCA, and we continue to liaise with them around some of the approaches that we're taking with modern slavery to ensure that we're supporting one another. And then in terms of the second question around supply chain. Could you just repeat that for me? Sorry, I just lost you a little bit on that second question.

Yes. No, that's totally fine. It was just, I guess, some elaboration on the comment that you made around seeking to increase the spend with diverse suppliers as part of the broader diversity strategy, presumably. And obviously, there's huge areas of social impact that, that can make. But at the same time, Lendlease has also been looking to consolidate suppliers globally. So I was wondering how you balance the tension between trying to attract potentially smaller, more diverse suppliers at a time when you are also looking at consolidation and how you manage potential trade-offs between those 2 objectives.

Yes. So it's always a little bit of a balance, as you know. Certainly, for us, what our overall strategy has been is for some of the very sort of key high-risk trades or some of the larger engineered tall order equipment that we purchase for our projects, we see that side of our supply chain being more global or national just with, obviously, the depth for the manufacturing supply chains that they need to have in adversely integrated supply chains that they have as well. But certainly, there is still lots of opportunity within our third-party spend to engage with local businesses. It's a key part of what we do across the 4 international regions. We're always looking to see how we can increase that spend profile that makes sense with those organizations, whether that be First Nation businesses in Australia, women-led businesses, for example. And then obviously, in the U.K., we're doing a lot of work in the non-for-profit sector with Beyond Sight. So there is still a big element of our supply chain spend, Alison, that we can utilize with smaller businesses or social benefit suppliers.

There are no further phone questions at this time. I'll now hand back to Mr. McCarthy.

Thank you, and thanks a lot, everyone, for dialing in. Great Q&A session. And please reach out if we can help you any further. Have a good day. Thank you.

That does conclude our conference for today. Thank you for participating. You may now disconnect.