Verizon Communications Inc. (VZ) Earnings Call Transcript & Summary

Hi. I'm Matt Ellis, Verizon's CFO. Thank you so much for joining us today as we take a deep dive into Verizon's focus on climate action. At Verizon, sustainability is in our DNA. We recognize that we have a responsibility to leverage our technology, operations and employees to help move the world forward into a more connected, secure and sustainable future. Verizon's ESG strategy is to be a responsible, purpose-driven, trusted brand on the cutting edge of innovation to benefit our 4 key stakeholders: customers, shareholders, employees and society. In order to bring this vision to fruition, our efforts are dedicated to effectively governing and managing the key ESG risks and opportunities that arise from our core business operations. Verizon's key areas of ESG focus are: promoting diversity and inclusion, which makes us a stronger and more competitive company; championing digital responsibility and inclusion, which is essential to earning our customers' trust and growing our business; fostering a culture of integrity and being mindful of the social and environmental impacts of our products and services, including human rights impacts, which builds trust with our key stakeholders; investing in reliable networks and affordable services, which keeps us all connected from first responders, to businesses, to schools and our communities; and finally, the focus of today's discussion, mitigating climate change risk, which presents us with the opportunity to deliver innovative solutions that advance the transition to a low-carbon economy. Leaders across Verizon's business are taking responsibility for our environmental footprint in many ways, and we will share some of our key climate initiatives with you during today's session. From a foundational perspective, we are building a strong system of governance and accountability to manage and report our climate-related risks and opportunities. At the direction of the Board, Verizon created a dedicated ESG office that is closely aligned with external reporting, corporate governance, capital markets and investor relations. We appointed a Chief ESG officer who reads out to our Board of Directors regularly on ESG matters including on our climate-related commitments and progress. We also established an executive Climate Oversight Committee to manage our climate-related commitments and strategy. During this session, you will hear about the bold steps Verizon is taking toward reducing our environmental impact; setting a goal to be carbon neutral in our Scope 1 and 2 emissions by 2035; setting science-based emissions reduction targets and publishing our Scope 3 emissions. Verizon's ambitious climate goals have been a catalyst for our green finance initiatives. We have done 3 individual [ $1 billion ] green bond offerings to date using the proceeds to fund green projects that will help us meet our goals with a focus on investments in renewable energy. In a little over a year, Verizon has become one of the largest corporate buyers of renewable energy in the United States, which you will hear more about in just a moment. We're also supporting climate resilience in our communities through Citizen Verizon, our responsible business plan for economic, environmental and social advancement. In October, we launched a Climate Resilience Prize to recognize and support climate resilience solutions that are ready to scale with an award pool of $500,000 divided among 3 winners, the Climate Resilience Prize will recognize solutions that are innovating to reduce climate changes impact on at-risk communities. Verizon also has made significant strides in our climate-focused reporting over the past 2 years. In 2020, we published our first report aligned to the recommendations of the Task Force on Climate-Related Financial Disclosures, which was the first TCFD Report published by a U.S. telecom company, that inaugural report built on Verizon's 20-year history of disclosing the greenhouse gas emissions associated with our energy consumption and explain to our stakeholders how working to become carbon neutral in our operations by 2035. In addition, we have published 2 green bond reports detailing the allocation of nearly $2 billion in net proceeds from our first 2 green bond offerings. Verizon has also adopted and published a green financing framework that is aligned to the United Nations' Sustainable Development Goals, or SDGs, which is a broad strategic framework that lays out how we think about sustainable financing. Verizon continues to be laser-focused on our climate-related reporting this year. In September, we published our second TCFD Report, which discusses some new goals and commitments and includes a pilot physical risk scenario analysis using leading climate change and reinsurance data sets focused on 5 weather perils. Putting sustainability center stage in the business world has never been more critical than it is today. That's why I have joined both the A4S CFO Leadership Network and the United Nations' Global Compact CFO Taskforce, adding Verizon's voice and our influence as a leading global corporation to efforts to ensure that sustainable decision-making becomes business as usual. CFOs are uniquely positioned to make sustainability business as usual by setting the tone at the top. There has traditionally been a view that CFOs either do what's fiscally conservative and responsible, or they do what's right, but they can't do both. I believe that this is a false choice. Supporting the integration of sustainability into Verizon's core business strategy and operations is not only consistent with but critical to our long-term profitability. As a UNGC CFO Task Force member, I am committed to integrating the SDGs into Verizon's corporate strategies, financing and investments and to align our sustainability targets with these goals. Our core business strategy and the technology we are building, mobility, broadband and cloud, make it incumbent on us to use our scale, technology and innovation to help make progress towards the UNSDGs. While Verizon supports all of the SDGs, our company is most focused on those SDGs where we believe Verizon can make a unique and significant impact, including: SDG 4, where we're preparing individuals for success in the digital economy; SDG 7, where we're supporting the transition to a greener grid by making substantial investments in renewable energy; and SDG 16 where we're working to promote inclusive societies where the rights of all people are respective through our social justice initiatives. On the heels of COP26 where global leaders convened to discuss the need for deliberate and bold climate action, I recognize that individual companies do not have to go it alone. We stand ready to engage with others in partnership including through organizations like A4S and the CFO Task Force to push for rapid progress in tackling climate change, and we urge our peers to join us on this path towards increased transparency regarding the climate-related risks and opportunities facing their businesses and the steps they are taking to combat climate change. Now I would like to welcome to today's climate action discussion several leaders from across Verizon's business. James Gowen, Verizon's Chief Sustainability Officer and Head of Supply Chain; Beth Sasfai, our Chief ESG Officer and Corporate Governance Lead; Chan Sin, a Vice President in Treasury, focused on meeting Verizon's renewable energy goals; and Brian Trosper, a Vice President in Network Engineering whose responsibilities include driving network reliability and efficiency. Welcome, everyone, and thanks for joining me this morning.

So Jim, thank you for being with me today. Why don't you start just by giving us a general overview of our key climate goals and the commitments we've made so far.

Sure. So first off, Matt, thanks for organizing this. This is fantastic and the opportunity to tell Verizon story. As you know, we've been on a journey since 2009. Sustainability is not new to Verizon, but getting there, we're maturing all the way along. What's truly amazing is where we've come in just the last few years. Our biggest impact is the networks we run. We run the networks that move the world forward. So when you think about that responsibility, we have to focus on the major environmental impacts of running those networks. And that's why we set forth, as you described, the net zero operational emissions target by 2035. And what does that mean? We're doing it in-house. We're focusing on our Scope 1 and our Scope 2 emissions first. We're doing that in several different ways. We've -- We're focusing on adding 24 megawatts of on-site green energy. Why is that important? That's where we live. That's where we work. That's where our employees come to. You referenced building into our DNA, that's exactly what we're trying to do. But we've gone one step further. And we are looking at by 2025 also having over 50% of our energy used to either be sourced or come from renewable energy regardless of where we're at. But we didn't stop there. Science-based targets, which we'll talk about as well. But we set 2 large science-based targets, which have been approved, and that is focused on both our operations of Scope 1 and Scope 2, and that's a reduction by 2030 of 53%. And then in our scope -- and our second target, it's on our value chain. And that's where we engage the entire supply chain, and that's a reduction by 2035 of 40%. And lastly, we can't do it alone. None of us can do it alone, both internally and externally, and that's where we partner with like-minded companies. We have the opportunity to be a signatory of the Climate Pledge. We've also had the opportunity to join forces with groups like [ GeSI ], the [ Global e-Sustainability ], [indiscernible] leader in the ICT industry. And lastly, JAC, the Joint Audit Cooperation, where we're looking at our entire value chain, supply chain, focusing on human rights and making sure that we're doing all that's right up and down the supply chain.

So you mentioned that, obviously, the network is our largest source of emissions. As you think of within their Source 1 versus Source 2, what's the largest piece there? And what do we need to do to get to that net zero emissions target that we have?

So absolutely, the networks, both wireless, wireline, globally, whatever the case may be, over 92% of our emissions come from our network and our facilities. It's a large, large piece. And Brian is going to talk all about what it takes to run those as successful as he does. But when you start drilling down to how do we do that, you mentioned upfront the 3 green bonds we've done. Been an amazing opportunity, and I can't thank you and Chan for your financial thought leadership there. But when you think about what we've done first in our industry in the United States, one of the first around the world in our industry to look at how we source electricity from renewable sources incremental to the grid has been unbelievable. We're almost at 2 gigawatts of green energy that we've got under contract and coming live right now. But then you look to our on-site renewable. I mentioned this already. It's where you come to work every day and you see solar panels over a car park driving right down to charging stations for our employees, enabling them to work green and live green and have their cars or their EVs charge during the day. And then last year -- and then lastly, you start thinking about, okay, how do we continue this move -- this movement forward? How do we roll out 5G in the most efficient way? And how do we work with our partners, both our large OEMs and our small ones to make sure that we're doing this across the board with an eye on a 2035 net zero?

Yes. So you mentioned, obviously, the network is the biggest source of our emissions, largely Scope 2 with electricity that we use. But we do have some Scope 1 emissions, primarily from the large number of vehicles that we have that service that network. So talk a little bit around kind of the fuel consumption and the fleet that we have as well.

Sure. While it's a relatively small piece, it's only approximately 6% of our total emissions, it's very visible when you have a Verizon Fios van pulling up in your neighborhood, you want to make sure that Verizon is a responsible company, and we're running the fleet the way we should. There is no silver bullet to the EV and the fleet space just yet. But we've been working now for many years on doing all the little things, moving from V8 engines to V6 for gas consumption, removing weight out of our trucks, looking at how we can utilize our own services, our telematics, to make sure that we're route optimizing to make sure that we're doing geo-fencing, helping our technicians to be as efficient as possible. We've also taken it a step further for all of our aerial type activity, where we're looking at having our aerial lifts run by electricity as opposed to being run by the truck being on. So you can turn down your idle time. All those things are steps forward as we look at the future. Stay tuned. There's more coming on the EV front. And anyone watching this in the finance world probably saw a release yesterday or earlier this week, I guess, I shouldn't reference timing based on when people are going to watch this, but there's a lot happening on the EV front, and we're in those conversations and ready to move forward. And then the last thing I'll say on that is take that work green, live green. Over 80 Verizon locations now have charging stations. Our employees have the ability to charge their vehicles while they're at work, and we're super proud of that.

Yes. That's good. Thanks, Jim. So Beth, changing tact just a little bit, maybe getting more to the G side of ESG around climate. What does the Board do to oversee the commitments we've made, the risk that we have and how we're managing that? You spend a lot of time with them.

I do. Thanks, Matt, for having me today. Our Board is really involved in oversight of our ESG strategy. The whole Board hears ESG strategy presentations a couple of times a year. We have an annual cycle where I present to the Board on ESG strategy, including our public commitments, how we're thinking about our ESG priorities, our reporting, I give feedback on investor engagement and those are pretty robust sessions. But also, right, ESG is integrated into our committee discussions. And in particular, climate-related risks and opportunities come up in every committee that we have. So the Corporate Governance and Policy Committee is the primary committee that's responsible for ESG oversight. And really, they look at themselves as kind of the hub across the board to make sure that we've got a line of sight into our commitments, into our resources, into our data governance, they kind of touch all areas of ESG, including reputational risk, public policy and sustainability. And I read out to them at every meeting on an ESG update and the topic and strategy. But our other committees are very involved in climate-related risk, too, as you know. Our Finance Committee spends a lot of time managing our green finance program, thinking about our green bonds. They also focus on managing risks related to our VPPAs and our renewable energy strategy and have been very, very active there. Our Audit Committee focuses on climate-related risk in connection with their enterprise business risk management program annually. And one of the things we focused on a lot in the last year is making sure that, that program is looking at long-term risk and not just kind of short-term risk and really building in kind of climate-related discussions and questions there. And finally, the Human Resources Committee looks at climate-related matters. We have an ESG component in our short-term incentive plan. We have a carbon intensity reduction target and so they get readouts there as well. So it's really a full board kind of exercise.

Yes. And obviously, the Board gets to see that progress because of the work that we're doing. We obviously work closely together, but you work across the Verizon management team. Talk for a second about the role that management plays, especially at the leadership level in driving and managing our commitments and the risks that we have around our business.

So our management top-down, as you know better than anyone, has been extremely focused on making sure that we make commitments that we can meet, that we have a road map and that we know how to talk about our progress on our commitments in a way that makes sense to our investors and other stakeholders. When I moved into the ESG role, we were obviously doing a lot of these things. These things didn't happen overnight, right? Jim's team has been focused on areas like green finance, renewable energy, on-site renewables. Brian has been focused on the network. Chan had treasury up and running with the program. But really what management has done by building out a centralized ESG function is to make sure that we do have a hub that looks across the company and is making sure that the right people are talking to one another, right? As you know, it's a real cross-functional area. I mean, look at the few of us sitting up here, there could be 20 more people up here that contribute to our ESG and our climate goals. So one of the first things that I did in my role was to form this executive Climate Oversight Committee, and it's comprised of executives from all sorts of units. We've got folks from strategy, network, fleet, real estate, treasury, finance, ESG and legal, and we really focus on looking at our existing public commitments, making sure that we all understand the road map to get there, we're working off the same set of assumptions. We understand what our emissions profile looks like, where we need to go, how we're going to get there and also how we're going to talk about it. And that forum has been terrific. It's chaired by both you and Craig Silliman, our Chief Administrative Officer. All of us up here are on that committee. And we've also been able to use it to kind of more broadly now think about different finance-related initiatives we might want to undertake relating to climate and explore some new kind of creative opportunities as well. But it does give us a handle on priorities, which are really important. We've been able to make the progress that we had on our climate-related commitments because we are not trying to do everything. We've really got our eye on the ball. Like Jim said, we know where our primary source of our emissions are, and we've got our key goals around those.

Yes. Thanks, Beth. So Chan, digging in a little deeper as we think about getting to that 2035 goal. Obviously, one of the ways we've chosen to get there that makes sense for our business is the VPPAs. What are some of the considerations that we make when selecting these renewable energy projects?

So Matt, thank you for having me here on a subject I'm very passionate about, renewable energy. So let's begin with the network. And Jim mentioned earlier that over 92% of electricity consumption is used to power our network operations. And when we look at our network, it's a nationwide distributed network that consists of thousands of miles of fiber supported by thousands and thousands of cell sites, small cell, micro cell and other equipment. And this equipment requires a 24/7 supply of electricity to operate. So when you look at renewable energy, it's just not feasible for us to rely directly on on-site renewable energy facility to power the network. As you mentioned earlier, that we think we can make a more material impact in accelerating the transition to a greener grid through investment in VPPA, and that's why we're focused on making investment in renewable energy VPPA. So on your second part of the questions on VPPA consideration. So we have put a lot of thoughts into what are the criterias for VPPA when we select them. So first and foremost is what I call additionality. By that, I mean new projects that can bring new renewable energy generation into the grid that makes the grid greener. And second is to secure our RECs, which what we call renewable energy credits that is generated by the project. And to avoid the appearance of greenwashing, we plan to retire those REC likely yearly to offset our carbon footprint. And then the last criteria that we look at is try to source renewable energy as close to our electricity consumption footprint for 3 reasons. First, we have an underlying exposure to energy prices. So by sourcing them close to the consumption footprint, we are able to mitigate price volatility for energy prices. Second, we want to offset our carbon footprint and also make investment in communities that we operate in. And then lastly, we don't want to source renewable energy in a very concentrated area where there's a lot of already congestions in renewable energy. So because of nation footprint, we're able to source them throughout the country. So those are 3 what I call top criterias in selecting VPPA.

Yes. Thank you. So when you think about our goal of 50% of our energy coming from renewable sources by 2025. What progress are we making towards that? And what's the total gigawatt capacity of the renewable energy that we saw so far?

So you mentioned, Jim mentioned, that we have almost 2 gigawatts of VPPA in our portfolio right now. And we have become one of the largest corporate buyer in VPPA in the U.S. So we have 16 VPPA in 10 states, 3/4 of them are solar and 1/4 in wind, and we have established long-term relationships with about 10 -- we are very well-established developers. This developer is going to help us scale quickly and cost effectively to achieve our renewable energy goals. So this 2 gigawatts represent about 50% of our Verizon's 2020 electricity consumption. We're in negotiation with multiple vendors for another 500 megawatts of VPPA in Q4. I'm happy to report that we are on track to meet our 2025 renewable energy commitment potentially earlier.

That will be great. Obviously, when we started on this strategy of using VPPAs to get towards our goals we made, the 2025 goal, that was before COVID. And also, we've had other challenges since then. Talk about has COVID and the supply chain issues that we've seen this year impacted how we're executing against our strategy?

So the last 2 years has been extremely challenging for the renewable energy industry. So we saw higher commodity prices, not just higher, significantly higher. We saw labor shortage. We saw higher construction costs. We saw factories manufacturing solar panel shutting down in Southeast Asia because of COVID and again, because of the Delta variants. And then we have longer permitting delays and then some regulatory changes in some of the ISO. So all these changes compounded by higher demand for VPPA by corporates and utility result in 2 things, higher VPPA prices and delay in commercial operation date by 12 to 24 months. Now I'm happy to say that Verizon is in a better position to navigate around these challenges because of 3 things: one, the scale of a renewable energy commitment/portfolio; second, our nationwide footprint; and then lastly, our very strong financial credit, thanks to you. Our developer wants to work with us because they know they can scale their portfolio very quickly and very cost effectively. This is a mutually beneficial relationship where they help us to help themselves, and we are able to achieve their renewable energy goal.

Obviously, one of the way we're financing those VPPAs has been the green bonds that we've spoken around already today. Talk for a minute, if you would, around not just the issuance of those green bonds, but the guidelines that we put around our green financing and how that's evolved as we've gone through the 3 green bonds and got feedback from investors in this space.

So we issued $3 billion in green bonds, as you mentioned. And the proceeds are primarily allocated VPPA -- renewable energy VPPA. So I want to focus on the financing structure, the green bond and other sustainability financing frameworks. These are a very important financing framework established so that we can accelerate the pace of global financing of sustainable projects that helps the environment in order for us to achieve Paris Agreement and also the UN Sustainability goals. So we see ourselves as a thought leader in the space. And as a leader, it comes with responsibilities. So we try to lead by example first. Second is to amplify and try to accelerate this financing platform. And lastly, to inspire other peers of ours to follow so that we have a good shot at meeting net zero for the universe. So what have we done to lead by example? We became the first U.S. telecom carrier to issue a first green bond back in 2019. And we are also an early adopter of the Green Financing Framework that you mentioned, and that is important. We also updated our Green Financing Framework recently to become the first corporate to have an underwriter selection criteria. And that criteria basically requires eligible underwriter to make -- to have established clear and impactful commitment that supports the UN Sustainability Goals. So that is very important. And we, on our part has appointed diverse firms in our last 2 green bonds. So in the second and third green bond, diverse firms accounts for more than 50% and 75% of the share of the wallet for both -- second and third green bonds. So this is what we have done on our part. And I'm happy to report that we're seeing a lot of good results. Other companies are following our footsteps. More and more companies are issuing a green bond and/or sustainability bonds to make investment that is good for the planet and other ESG matters. And also that they are appointing more diverse firm in the underwriting business so that they have a higher share of the wallet. So we are very happy that we lead by example and other follows. We also make commitments on the financing formwork that we want to be transparent on the impact reporting. So it was very clear that for VPPA, we're going to publish impact reporting every year for a green bond issuance.

Well, thank you for that. And I really reiterate your point around what we've done with the issuance of those bonds. And yes, they're focused at green bonds, they're focused on climate, but we've done it in a way that also brings together other ESG goals as well. So the team has done a fantastic job there. Maybe coming back, you mentioned there some of the transparency. Jim, if I could, one of the things we've been doing are being more transparent in our reporting and our target setting, but we took that to another level this year when we announced 2 science-based targets. So talk for a second, if you can, how we're engaging with the value chain to meet those goals? Obviously, doing the things we do within our business is in our control, but we recognize that it's not just what we do within our 4 walls, it's working with our partners upstream and downstream where we unlock true value. That's obviously not easy, but spend a minute talking about some of the things we're doing there.

Yes, sure. So science-based targets, which, as you know, took over 2 years from when we said we were going to announce them to when they actually were approved and we went forward. We really looked at it from 2 fashions. So on the internal side, we focused on what we could do with our Scope 1 and our Scope 2 by 2030 and setting our goal to reduce. And then on the value chain side, we look externally at our partners because that is such an important part. And I just want to go on what Chan said because when you start looking at where you work, where you live, well, it's also who you operate with and who are your partners. And choosing those partners for long-term success, the global supply chain has never been more in the news than it has been lately. And it's how actors perform during these times, that is so, so important. So along those lines, when we looked at the reduction of 40% and our second science-based target in our value chain by 2035, we started talking, let's start with measuring it. And we've gone to all of our key partners. We've done the 80/20 rule. We've looked at our largest partners and said, okay, do you have greenhouse gas emission targets? Are you tracking them? Are you sharing them with your downstream, your component suppliers, your Tier 2, your Tier 3, Tier 4. And that gets very, very important. You set aside the geopolitical situation, you set aside some of the other challenges that are going on. It starts fundamentally with getting there. And that has been an engagement that, again, I can't say enough about our partnership, Brian from network, Chan from finance and Beth keeping us all together in the terms of the way we look at science-based targets. They've been established early this year. We've announced them. We're tracking them. But then the last thing, and you talked about it in your opening, when you look at the UNSDGs and you start thinking about where we're going and building a network for the future, you get into future proofing. And sustainability is not just good for the universe, as Chan said, but it's good for business. And that's the key thing that I'm so proud of what Verizon has done and on this journey we've been on and making sure we're hitting that. When you look at our partners as well, when you look at [ GeSI ] and some of the thought leadership papers we've put out, the smarter reports, the digital purpose movement that's gone, the real power that comes to delivering science-based targets, looking at your value team is collaboration. And there is, as I said it earlier, there's no silver bullet to sustainability. There's a lot of incremental wins. There's a lot of incremental renewable energy. There's a lot of incremental solutions to supply chain. Keep them off planes, put them on boats, keep them off trucks and put them on trains. Those little steps all make a difference.

Yes Exactly. So we've spoken a lot about how we move our energy to more renewable sources of energy. But Brian, if I could pivot to you. One of the other things we do, of course, is just be more efficient in our operations and the amount of energy we actually use irrespective of the source it comes from. So what are we doing as you think about our electricity usage in the network and reducing that?

Yes. Thanks for having me, Matt. And I'm looking forward to tell a story about what we're doing on the network side. As you heard, 92% of our electricity is driven by networks. So this is very important. And as good engineers, a part of good engineering is not only to build, but also to operate things efficiently. So I'm going to tell a story here about what we're doing from a build perspective, what we're doing from an operate perspective and what we're doing from an evolution perspective and how that translates into reductions of our power consumption. So first on the build perspective. We use a macro measure looking at the amount of traffic that traverses our network and how much power we're consuming. And we evaluate all new technologies and say, does that drive that efficiency dial in the right direction. And what I mean by that is we should move more bytes per watt of energy consumed with every iteration, with every piece of equipment and every service we turn up. So that's a big macro level rule that we drive. But that doesn't necessarily translate into a reduction of kilowatts. So some of the things that do translate in reduction in kilowatts are when we replace older HVAC technology with newer HVAC technology. So a lot of our energy consumption is driven by cooling the equipment that we have in our network. The newer technologies are much more efficient. They use economizers, they use variable frequency drives, they use free air cooling, which says when you're outside air conditions, error conditions are being met, you don't have to mechanically cool your space. You can pull in cold air from an outside. It doesn't have to be cold, it has to be within a specification to meet the equipment specs. And that all drives a reduction in power. And it's noticeable when we go out and upgrade a facility and put in a new HVAC design and system, you see that site's energy consumption drop. Very similarly, to deliver on reliability, we use a lot of DC power plants with batteries. So batteries and generators are a key way that we deliver on our reliability promise. Well, those older DC power plants -- or from an AC perspective, uninterruptible power supplies, they all have losses associated with doing energy transitions from AC to DC. When we go in and upgrade the older DC rectifiers to the newer rectifiers, they have a much better efficiency curve. And again, you see a noticeable drop in the consumption of the site when you do that upgrade. The other area we're working on from a build perspective. As Jim alluded to, we're adding 24 megawatts of on-site solar. Those sites we recently turned up on in Bridgewater, New Jersey, that alone was 2.1 megawatts of solar power. So again, Chan mentioned, we can't do on-site to meet all of our needs, but where we have those opportunities, we definitely are doing it to reduce our consumption. Transitioning from build, I might go to operate. So it's great that we build these efficient systems, but you have to make sure they continue to operate as efficiently as possible. And the way we do that is through our prescribed preventative maintenance routines. And what I mean by that is very simple. Think about your own home HVAC system. If you never change that filter on that HVAC system, you're going to consume more energy. So think about all of our network, all the network elements that we have out there, all the cooling systems we have out there, they predominantly all have fans. And usually where you have a fan, you're going to have a filter. So having that maintenance routine that cleans those filters, replaces those filters, ensures that we're continuing to operate that network at its peak efficiency. So the thing I'm excited about on the operate side that's come along with our AI and ML now technologies is we have models for certain pieces of equipment and sites that frame up how much power we think these things will be consuming. And then we can look at the actuals. And if we see that they're off of the range we expect, we call it the outlier detection, that focuses our attention to go back in there and figure out why is this outside of the parameters we expect it to be and get it back within specs and again, reducing that electrical footprint from an operation perspective. And then the third prong is how we're evolving the network. And many of you have heard our intelligence as a network and our network transformation stories. And those technologies definitely deliver on the better bytes per watt of power consumed exponentially, multiplier -- I won't say exponentially, but multiples of what the old technology is. So we want to get the older technologies migrated to those new directional networks. And that's a very impactful program. It's a multiyear program. But we really do see the results of both our network transformation and our [ IEN ] network migrations because we have over 30,000 network elements that we've been able to turn down. And so we're transitioning from less efficient technology to more efficient technology and we're actually getting to turn the power switch off of the old stuff, which immediately brings back power savings to us. So it's a great story from evolution. The other thing beyond [indiscernible], one thing that we're also excited about is these sleep modes and very simply think about our Radio Access Networks. And our networks have busy hours, the peaks when the most number of [ UEs ] and amount -- the highest number of bits are having to move across. And to deliver on our performance from a reliability band, we have all of our radio resources powered up and delivering those services to our customers. But then think forward to 3:00 a.m. in the morning, those [ UEs ] and that demand has dropped off. Now with the capabilities we have, we can dynamically or by schedule power down some of those radio resources to match the demand. And by powering down some of those radio resources, you're still providing services, but you're matching your power needs to the actual network demands. So that type of evolving technology, I'm really excited about to really optimize our network even further. So those are some of the many things we're doing, Matt, to reduce our Kwh consumption on the network.

Yes. So there's a huge amount of activity in there. Obviously, we spoke earlier about how customers always rely on our networks, 24/7 under normal environment circumstances. Unfortunately, we find times when we need to operate our network with weather-related emergencies and disasters. Talk a little bit around some of the -- we prepare for those things to make sure that the network is resilient, and we're there at the times when our customers need it most.

Yes. That's in our DNA, right, making sure our networks are up and when the customers most need them. First and foremost, it starts again with how we build the network. So our engineering designs, our architectures, our standards that we built to both from a redundant perspective of network redundancy where we can have demand network redundancy and as far as our design and build standards. So we have always looked at environmental risk from a perspective of storms, hurricanes, wildfires. And we have adapted our build standards to account for those risks in certain areas. As an example, if you're in a hurricane area, we have cell sites on platforms. So everything is raised up out of the flood risk area, things of that nature. So it all starts with how you build and design that initial network and having an eye towards what that geography's risk profile really is. So we start there. But then I think what really makes us strong in this area is our whole business continuity and emergency management process. So we have a process that we go through that develops continuity plans for our people, for our network and for our systems. And we build those plans in looking at and considering these risks that we have on the network and to our facilities. Those plans are updated annually. So we build them, we test them, we audit them and we certify them. So on an annual basis, we're reevaluating these plans and updating for the dynamics and changing risks. So having a good plan is on top of a strong foundation or 2 of the key building blocks. But then get to an actual event, so you have an actual climate event, hurricane, major storm, tornado, things of that nature. That is where our standing up and our process really stands out. So we look at the event and based off of its anticipated impact. Whether it's local, regional, national or global, we engage and stand up the appropriate business continuity plans based off of that threat. And so we're optimized to not overkill it, really just size it to what the event is going to be and make it as local as it needs to be, so it can be tailored to those local communities or if it's broader on a regional basis. So that all starts with everybody then pulling their plans that we've already established and going through all their checklist. And there's checklist, generators, fuel-runs, staging app, staging personnel, staging assets in preparation for the event. And we stage our assets, the people and our assets not in harm's way, but close enough to get there fast once the hazard passes through because always employee safety is #1. So we have those assets at the ready. We have our NOCs that are monitoring the situation as the event passes through. Obviously, our resiliency, both automated resiliency with redundancy kicks in. And if there are some things that come up that we can remotely route traffic around an event or an outage, we can remotely do that to keep services up and running. And then once it passes through, then those assets that we talked about, the people and the portable in concert with local authorities, local utilities and other local service providers deploy into the region, restore the network. Now the final piece here is once everything is up and running and we've restored our services, we come together and we do a postmortem. And we say what went well and what can we improve upon. And then whatever is on that what we can improve upon list goes back into the cycle to be incorporated into those business continuity plans or design standards. So that continuous improvement cycle is what allows us to continue to deliver on our brand promise of having the most reliable network, Matt.

Thank you. So we mentioned earlier that we've been -- we, earlier this year, did our second TCFD Report. And as we continue to expand the content of some of these disclosures, this year, we included the pilot scenario analysis of potential implications of long-term weather impacts, not just looking at the weather we have today but the different forecast of the weather we may be dealing with over the course of the next few decades. And looking at how the network would be impacted by changes there, which was I really enjoyed reading through it and understanding all the details in there. Talk a minute for a second, if you would, about how we think about those changing climate perils on our networks and our response to that.

Yes. I really enjoyed reading through that and being part of doing that pilot process. Also, I enjoyed reading it, but it also made me think the things that all of our teams are doing to lower global emissions, how much they really matter. So that was what really struck with me is like, okay, we took -- in this pilot program, we took some of our sample U.S. assets. And we said, okay, there's all these very detailed future models of climate risk and what that translates into storms, things like more intense hurricanes, more frequent hurricanes more drought that brings up more wildfire risk, those types of models. And they're all modeled off of global emissions, so varied levels of global emissions. So we looked at a couple of those global emissions and what those resulting models did to the climate and what that meant to those sample set of assets. And the good news from what I said earlier, I think we have -- I hope you get that we have a very strong foundation that we've already established based off of current risk. And we've always had an eye towards increasing risk. This just took it to a next level. This was like decades more into the future. The good news and result of that pilot program was our network looks to be very geographically dispersed, and we look to have good engineering roles in place in those areas where the risk are going to heighten. So we feel very good about where we're at and how we're positioned for the future, but we never rest on our laurels. This has really been an eye-opening thing. The eye-opening thing for me is certain regions of a particular risk may decrease and create a new risk that comes into play. So that's what I really look at with my team from a perspective of engineering and operating, like where are these new risks emerging and what can we be doing to address those new risks. So it was encouraging from a perspective of we're at a very good foundational starting point. I think we're doing a lot of things to contribute to reduce that emission profile, to limit the impact of this. But as network engineers and operators, we're going to be prepared to deliver on our reliability brand promise. I feel really good where we're at right now, Matt.

Yes. Thanks, Brian. So Beth, we talked for a second there about the second TCFD Report, adding in that scenario analysis. Backing up a second at a more macro level, just how are we doing reporting our progress towards these climate goals? We put out a good number of goals there. Now we have to go meet them and it's imperative that we show progress on meeting those. So how are we doing there?

So Matt, we have a long-standing history, almost 20 years of publishing our Scope 1 and 2 emissions. And I think that's where any company needs to start in terms of understanding what its climate goals should be and where its progress is. And those are externally assured. And this year, for the first time this summer, we published our Scope 3 emissions for both 2019 and 2020, and those were externally assured as well. And that's a difficult process, a lot of assumptions, a lot of work went into that. And so we've been very, very focused on making sure that, that data is available on our website and in our reporting. And as everyone mentioned, we've published 2 stand-alone TCFD Reports. That is very much a journey, right? We started our first report based on a lot of discussions we had with our investors. This was a framework, they thought was decision useful talking about governance first, then risk oversight, how you're managing and mitigating risks, what your strategy is for dealing with the risks that affect your business in particular, and then metrics, goals and commitments and progress. So we really feel like that is the right framework for us to report on. We've absolutely embraced it. Everyone up here is familiar with it. And not only familiar, but integrally involved in the reporting, right? And you can hear how it's iterated. We started out with one scenario analysis that really looked at transition risks. This year, pulling in a pilot risk analysis dealing with physical risk largely in response to questions from investors. And so I think we continue to build out our reporting to make sure that we're talking about all of these things that are integrated into our business processes. And I'm so happy that people have a chance to hear Brian speak today because you can hear all the things that we're doing that maybe previously we didn't even report on in terms of climate-related risk. It's just in our DNA. It's the way we handle the network, right? It's the core of our business strategy. So making sure we're building out kind of that kind of reporting. And then the last place you can hear a lot about, not just our climate goals and our big public commitments, but also progress on other green initiatives. I mean, Jim's team does an amazing job of -- we've got a green team, really engaged workforce. We've got a lot of other initiatives and partnerships that we're running, and so you can read about those in our ESG report.

Thank you. So obviously, a lot that we've done so far around reporting, and that's evolved and will continue to evolve. One of the things that we expect to have ahead of us here, and I know I certainly have a personal interest in, is we're expecting additional reporting requirements including mandatory SEC climate-related disclosures. So are we going to be ready?

The answer is most definitely, yes. I get that question a lot. We have been working to get ready for that for the past few years. And a couple of things I would mention. One is, hopefully, the SEC will use a lot of what's out there already, especially I think the TCFD Framework is just superior. And so I would hope that they would focus on that. But we definitely have the guts of our reporting. We've got the guts of our emissions profile. We are really focused right now, as you know, on data governance, right, setting up a data governance framework, dealing with controls and systems to make sure that we're very confident in the data that we're producing, particularly if it's mandated by the SEC. And one of the other things I've been spending a lot of time doing since I feel like we're in a good place for SEC reporting is working with companies and partnering with them to help them figure out kind of how to start. And we've had a constant theme on the panel about partnering with suppliers, partnering with customers, partnering with peers. So we've spent a lot of time doing case studies and talking about how we built out our TCFD Report. I worked one-on-one with companies and done some workshops focused around how are we thinking about data governance. And then you and I work closely with the A4S and with the UN's Global Compact CFO Task Force to also make sure that we're talking about reporting with our peers.

Yes. Well, thank you. Thank you all of you for joining me today and talking about everything we're doing in the climate space. It's a fantastic team, and it's amazing what the Verizon team achieves when we get behind something. So we take our position in climate very, very seriously. It's important as part of being a sustainable business, being a responsible business. You see that from the commitments we've made. You see that from the progress that we're making towards those commitments. It's a journey. We've got a lot of work to do, but we're happy to be on that journey and look forward to not just making progress but accelerating our progress there. And also showing to all of our investors and other stakeholders the progress that we're making, improving the -- continue to improve the level of detail in that reporting. So we look forward to being on that journey together with all of you. Thank you for your time today and look forward to speaking again soon.