The investor perspective: driving growth through sustainable impact

31 minutes

In this podcast episode, EiQ Chief Customer Officer Andy Gibbard and Goldman Sachs Asset Management (GSAM) Operating Partner Paul Albright unpack the investor perspective on sustainable impact and how it drives growth. They explore why investors treat sustainability as a proxy for operational discipline, how companies should prioritise and measure sustainability initiatives, and the role of organisational design and capital allocation in turning sustainability from a risk exercise into a growth engine.

The conversation also dives into the practical intersection of AI and supply chains — why data quality and operational excellence are prerequisites for effective AI, the difference between early AI point solutions and next‑generation agents that can observe and remediate and how leaders can harness technology to scale measurable, long‑term impact.

Full transcript:

Andy Gibbard, Chief Customer Officer, EiQ: Hello and welcome to our session today on the investor perspective and on driving growth through sustainable impact. So sustainability teams have a complex set of stakeholders whose demands that they need to satisfy, whether that's clients, consumers, internal or external stakeholders. But quite often for those working in sustainability teams, the investor perspective is one of the hardest ones to reach. What do investors really think about sustainability? And how does it factor into their decision making?

Well, today, we're going to get that perspective directly. I'm here with Paul Albright, Operating Partner at Goldman Sachs Asset Management and member of the EIQ Advisory Board. And today we're going to dig into the intersection between investment, growth and sustainable impact. So, Paul, welcome to our session and thanks very much for joining me today.

Paul Albright, Operating Partner at Goldman Sachs Asset Management: Thanks. I appreciate you having me.

AG: So you're really at the heart of the action, aren't you, being based pretty much in Silicon Valley, where all of the stuff that everyone's talking about, SaaS and AI, is happening. And there's quite a lot of different projections about where those industries are, particularly AI and what the outlook is. What's your perspective on that? Where are we right now in terms of the maturity curve of SaaS, but then in particular with AI as well?

PA: Yeah. So I think we're in the later innings of SAS and in the early innings of AI. And I've looked at over 500 AI companies, and I think of those 497, to be exact, I will be out of business within the next year. I think three of them that I've met with are going to do quite well. And the difference between what I think of as 1.0 AI versus 2.0 when it pertains to B2B or B2B2C type companies or enterprise style, is that they've built an architecture from the beginning to understand how to leverage data on the back end. And then they build an architecture where there's a platform to the agents. And then think of agents as like modules.

The agents are automating workflows and doing tasks that are remedial for people, because as we'll talk about today, companies can't hire fast enough to get out of the challenges that they're in today. So hiring is not the right way to solve problems. It's using technology and it's proven that way in the past. So it's still very early.

I think we're now seeing, I've seen like five companies in the last month that were very hyped up, got ridiculous valuations. I ran from them early and I'm starting to see them get thrown out of companies now because what happens is they'll automate one step. So I have a sustainability AI product and that helps me with one area. But then if I apply artificial intelligence to that area, it may just move the problem downstream to where I don't have as many people to go like remediate the problem as an example. And I still have the problem within the company. And that's what I've seen with that 1.0 version.

The next generation of AI companies that I'm really excited about and getting involved with can observe challenges, but they're also smart enough and they can learn quickly enough where they remediate the issues as well, so they can execute, not just observe. And I think that's really the big difference between the two. I think venture capital, honestly, is lagging. I think most VCs are throwing money at the opportunity too much, and we're going to see a lot of them have challenges, but there will be a lot of winners coming out of this, and I do believe it's the biggest technology change that I've seen in my career, and I'm super I couldn't be more excited about it.

The other piece of it that I wanna mention is that artificial intelligence is only as good as the data behind it. And so that's where most companies are not confident that their own structures are clean and they're tagged and they've got their own databases in a form where it can be a private LLM that they could use to train their more public LLMs that they're subscribing to as well.

And so I've had a lot of discussions with CIOs, supply chain execs, CISOs around this because the artificial intelligence can only, the products and the agents can only do as well as the data you have and the prescription that you're giving them. So if you're not operationally excellent and you don't have great data to feed them, they're not going to do a great job and they're not going to learn the right things to do. So that's where these have to go hand in hand. And so for those companies that are disciplined and rigourous about how they operate and are becoming best of breed at what they do versus their competitors, those are going to be the ones that are successful, leveraging artificial intelligence. So we'll talk about that as we get into this as well.

AG: Excellent. Good stuff. All right. So if we turn from AI and look more now at sustainability, starting off just quite broadly, what role does sustainability really play in investment strategy and in investor decisions?

PA: So sustainability is a lens that investors look at that gives us the ability to size up how rigourous and how disciplined and how successful a company will likely be in the future.And so what I mean by that is if you're not good at measuring sustainability and defining what it means to your business and to your company, you're probably not great at it in the other parts of your company either. If you are really good at it, then you're probably disciplining in the other parts of your company too.

So the theme, I think for any head of supply chain or sustainability exec, CEO, is that you want to be as rigourous with how you invest, maintain and report on sustainability as you are with your capital strategy or as you are with your productivity metrics. And so I think that's the important way to think about this is sustainability is a very important lens into a company. It doesn't just mean risk. By doing it right, you'll combine risk management and risk remediation with more efficient growth and better positioning and frankly, a lot more goodwill coming from the industry, which in turn creates shareholder value, which is what companies are measured on the end anyway.

AG: Okay. And then thinking about this evaluation process when investors are evaluating companies' performance, how has that changed over the last few years? And is sustainability rising up the agenda or is it where it's been for some time now?

PA: Yeah, I mean, it's a crazy world right now, as we all know, and probably crazier in the US than in many places around the world, where, how do you think of sustainability? How do you think about emission control and carbon footprint and scope three and those types of things? And so I think there's a short-term and a long-term view is the way that I would look at it is, we're going to see ebbs and flows as we do with everything. So you want to be really smart.You can't just throw money at everything. There's just not enough budget around for it. So what can you measure? How do you stack rank? What is most important to your sustainability strategy and then work backwards from it. What are the metrics you're going to use to measure success or failure?

What are you going to stack, rank, the spend, and the business impact that your sustainability projects that are getting funding on are going to take? And then what does your org design look like? Do you have the right executives to lead that charge? Do you have the right systems to be able to measure that? Because we're still in the early stages, in my opinion, on what does sustainability mean, and then what does that impact to not only your company, But then you have to put that in perspective of your supply chain, your suppliers, the multiple tiers that your company is working with before you even get to the world at large, which is clearly warming, as I was wearing a t-shirt in London yesterday. And so you can see changes happening, you can feel it, but then how do you start to work backwards from that into thinking as an exec in your own company about your funding strategy, capital strategy, your operational strategy as it pertains sustainability.

And I do believe that sustainability should be on par with your other key investment areas within a company, being people, culture, products, and growth. And I think that we're going to see more and more of that as we go forward, because I think people are getting, number one, sensitised to it. And number two, we're now at the point where we can measure these things. And that, again, going back to artificial intelligence, I think that's where AI can help a tremendous amount as we go forward because it's complicated to measure. And so you need these agents that are working 24 by 7, seven days a week, helping to bring the data in and then being able to show and monitor and report on your progress or not.

AG: Yeah. All right. So thinking about then our EIQ clients, they are often really focused on supply chain, due diligence, and for the kinds of brands that we work with, supply chain is really what is driving sustainability performance for those companies. So how can this area drive value? How can it reduce risk and how can it attract capital? And thinking there about the different angles of being purpose driven versus being compliance driven, is there a particular kind of direction that you think people should head in?

PA: Well, I think it starts inside your own business and thinking about risk, thinking about growth and thinking about compliance, and then thinking about the bigger picture of of external compliance, if you will, or being purpose driven. And it's more meaningful, and I'm seeing this in a lot of companies in the US right now, is that the younger generations are choosing to work for companies that are purpose driven and are leaving companies that are not purpose driven. And I think that's a really healthy trend in general, but it is absolutely a consideration for companies as they go forward.

That said, if you reduce risk and then you're in control of your supply chain in a way that's beyond traditionally what companies define as their supply chain, which is kind of first tier. Because the supply chain now is, there's so many tiers, there's options too. Okay, here's my supplier I'm using for this part of my supply chain, but I also have alternatives. And I want to constantly model them.

So I'm modelling my supply chain, I'm modelling my alternatives, I'm modelling risk, and then I'm looking at changes that I could make to create more efficiency. And that level of operational rigour has not been possible in the past, and it is now. So if you think about it, if you can reduce risk through compliance at a much more granular level, as well as we talk a lot about cybersecurity, which is a whole other area to open up, which is a big part of risk, I think, as we go forward.

But then you couple that with efficiency. So I think of it as capital efficiency. And then the third dimension is growth. And if you can combine your ability to grow and meet demand and be more efficient with that, with risk reduction and then efficiency of your supply chain through alternatives and through modelling, that's how you create a much more valuable company. And you'll be the leader within your sector. And as with my investor hat on, the number one company in a sector is, generally speaking, worth 10 times more than the others. And so you want to be a leader, you want to be a category leader, and then you want to take market share away from your competitors. And the best way to do that is to become operationally excellent in this way.

AG: Paul, thinking about the board perspective and thinking about balancing responsibility on one hand versus resilience versus growth even as well, balancing or maybe even trading off at the board level and at the board perspective, how do these issues sit together? How do they tie together and what kind of a trade off is normally going to be there?

PA: Yeah. Great question. And if you think about the responsibility of a board, governance is in the forefront. So what does governance really mean? It's the balance of risk for a company versus reward for the company. And if you work backwards from that into the structure of a board, there's two key parts to it. One of them is the compensation committee and the other is the compliance or audit committee. And that audit committee is all about risk and risk management. The compensation committee has everything to do with growth and efficiency of the company and the metrics that go along with that.
 

So let's go over to the audit committee first, because I think that's the scariest part of this is boards and companies need to identify risk efficiently and as quickly as possible. And that means using technology to figure out whether we're being alerted or you're raising a risk issue that is true or false before it even hits the board. You get rid of it if it wasn't true and then figure out how that doesn't happen again. And if it is true, how do we define that risk? Where did it come from? How do we remediate that and fix it? And what do we need to do to improve the operations of a company so that we don't have those risks anymore and we can move on and feel like that will never happen in the company again or cause any kind of issues? So that's the highest level.

If you dig into it a little bit further and you think about what makes up a supply chain, how many tiers you have, how many of your third-party partners or supply chain partnerships are also located in countries that aren't as advanced and could be family-run businesses that don't use a lot of technology. The challenge is not only inside your company, but more importantly, throughout this supply chain of smaller, could be family-run businesses and making sure that you don't have risks coming through them. And I think that's the important thing that we're solving now with LRQA and EIQ.

And if we can automate that as we go forward more with artificial intelligence, I think we're going to find that there's a dramatic amount of risk reduction that we can create, which then goes right into the board having more ability to spend capital or approve capital for being spent on growth and operational efficiencies. that will then convert itself into better shareholder value.

AG: So we're in quite a volatile geopolitical environment and there are definitely some forces there pushing sustainability up the agenda, but there are other forces concretely pushing it down as well. And that can ripple through to business and some businesses out there are deprioritising sustainability. What would your message be to those companies, to those leaders who are maybe thinking of pushing sustainability down the agenda?

PA: Yeah, I understand that capital is limited. And so you have to make trade-offs and you have to make hard decisions as a board and leadership team. That said, I think if you push down sustainability and supply chain requirements too much, you're threatening the longevity of the company. And I mean it to be that hard because it's a short-term trade-off for long-term shareholder value because the pendulum will always change. It'll swing from being too far in one direction to too far in another direction.

It'll continue to come back and forth. And some places are swinging pretty open right now. But if you look at the requirements for sustainability, I think those are going to continue to progress and the ability to investigate the sustainability of a company and their supply chain and their products has never been better or more transparent. And I think we're going to see that coupled with younger generations wanting to work with companies of purpose and not companies that are hurting other companies, other people, the planet, et cetera, that I think it's a really bad strategic decision in the long term. And they really need to break this down into what I think of as three components.

It's trade volatility. You think of scope three and carbon emissions and negative results from making products. And then the third is cybersecurity. I think that's the other big bucket that is high on the agenda of a lot of the companies that I'm working with and seeing right now. And if you can start to think through those dimensions, I think it's imperative that companies don't block either of those three, but instead stack rank, which are the most critical, which had the most short-term impact, which will have the most long-term impact, and make decisions above board and debate them. Because if you just turn it off and then you throw all your money into short-term growth and forget about that stuff, you're not making the right decision for your shareholders. And I think boards need to be careful of that.

AG: Clues in a name, right? Sustainability.

PA: Yeah, exactly.

AG: And do you see cybersecurity as being an adjacent topic to sustainability, or do you really see that it's a core part of sustainability today?

PA: No, I think it's a core part because if you look at the attacks that are happening right now, they're coming from angles we hadn't thought of before. I mean, we saw a few weeks back one person kicked off 13 attacks and seven companies were globally impacted in minutes. And so these cyber attacks can come from your supply chain. They can come from an external bad actor that finds a vulnerability in your own website. There are so many complex ways now that AI is being used to attack your company that you need to have this protective dome around your company that includes what we would historically call sustainability, the different tiers of your supply chain, your third parties, et cetera, because it's just another way to get in and attack your company. And what we're seeing in most large companies is that cyber attacks are increasing over 100% per quarter. It's not a small number, and there's just no way that you can hire enough experts to solve this problem. You can't hire your way out of it.

So every company has to use their own operational efficiency and technology and artificial intelligence, in my opinion, to solve this, along with, obviously, domain experts and strategic consultants that really understand how to set this up in a way that's going to protect your company and then when it comes to supply chain, that's where technology really comes in, right, with things like adverse media scanning within EIQ, enabling you to reach across those tiers, get alerted to incidents as they happen. Yeah.

Yeah, and what we're learning is, step one is alerting when there is a problem and then categorising it in the right way. But then immediately, step 2 is how did that happen? And so navigate, and the average is 20 steps. So to find out where the vulnerability came from, that allows someone to penetrate your company and create a problem. It's an average of 20 pivot points to find that, which gets back to how your API is working. How do you integrate with these other systems that you're working with? What about these other companies that have access to your systems? Once those pivots are made and you find where the vulnerability happened, then the question is, can you remediate it? Should you turn off that port in that system? Should you remove that user? What do you do about it?

And do you have the right definition of workflows? And when should a human get involved to approve it versus you let artificial intelligence take ownership for solving the problem completely? And how do you become comfortable with artificial intelligence becoming deeper and deeper with the steps that are necessary to solve the problem. Because if it takes you three hours to solve an attack versus 3 minutes to solve an attack, it can mean hundreds of millions of dollars for a company. So yeah, it's critical.

AG: Okay, going back to the positioning of the sustainability and supply chain risk management on theinternal agenda and on the investor agenda as well.And thinking about our community of responsible supply chain professionals, sourcing professionals, sustainability professionals, really grafting to try and push those up the board agenda, align stakeholders.What advice would you give them?How can they do that effectively?Andwhat can they tell the board that is going to resonate?

PA: Yeah. Yeah, great question. And this gets back to knowing your audience and knowing how they think, and therefore, how do you present this back to the board in a way that they can understand and support you? Because that's what they want to do. They don't want to shoot down new ideas or initiatives that are going to make the company more valuable and reduce risk. So a couple of things. One is ensure that what is being presented is financially defendable and is mathematically articulated. And this is the hard part is if a person's not used to converting the project into what's the business impact, what are the metrics I'm going to use, how does this impact the company from an operational perspective, what's the cost going to look like by month, by quarter, by year, and then what is the return on investment of making this investment and articulating that in bullets, it's going to, they're going to have a trouble, a problem with the board, with the board communication.

So, number one is think about this in financial or math terms and really try to communicate that well, because in my mind, math is the common language. You know, we all have accents in different native tongues and different backgrounds and different trainings. Math can neutralise that. So that's number one. Number two, is think about how you break this down in a way that others can understand your roadmap. And what's worked for me in the past is what I think of as GOSPA. So goals, objectives, strategy, plan, and actions. And so work outside in. What does success mean for my strategy? And what are the goals?

If this is successful, what does this do and make them SMART goals? So make sure that they're measurable, they're time-bound, they're as simple as possible, et cetera. And then work backwards from that to think, therefore, what are the objectives for achieving those goals? What are the strategies? What's my plan for the next quarter or two? And then what are the metrics I'm going to use to measure success along the way? So we have some road signs that are saying, yeah, we're going in the right direction. And then if we miss things, we can make mid-course corrections as well. So give the board the ability to ask questions on a quarterly basis, and then come with a very balanced approach to say, this worked, this didn't work, because you don't want them to feel, number one, that you're being too salesy with them. Number 2, you don't want to seem too negative. So, making sure that there's that balance between, you know, here's what's working, here's what's not working, what I'm doing about it as we go forward. I think that'll make it a lot more successful as you go forward.

AG: Okay, excellent. Thank you. All right, so we've talked a bit already about tech and about AI, but I'd like to go specific now and think really about the area that EIQ is operating in. And with your time on the advisory board so far, you've, you know, been able to really dig into our space of supply chain risk management and to see what impact technology is having here. So I'm interested to get your thoughts on that.

How pivotal is technology and is there any areas in particular, whether it's automation, API connectivity that you call out as being particularly key?

PA: Yeah, it's funny. The first time I was CEO was a supply chain SaaS company and that was over 15 years ago. And to see where the supply chain and sustainability world has come to partnering with technology is just fantastic. So it's really exciting to see where we are today, but what's in front of EiQ as we go forward. To me, technology has got to be the great enabler at every stage. And there's no more exciting time than now when AI is maturing. We're going into this 2.0 phase.
 

And so I think that's what's going to be critical for us is that We know we can't hire our way out of the inefficiencies that we see across sustainability and supply chain, the supply chain world. And those companies that embrace it first and do that well with tying it to their way that they operate the company are going to be the successful ones. And they can displace the current, like if you're number three in your market segment and you do a better job of leveraging current technology and operational rigour, you can and will displace the competitors that are above you today. I've seen it many times in the past. API and IoT are certainly kind of level one. There's a lot of systems, there's a lot of intelligent devices, more coming out all the time with more sophistication.

So thinking about how do you make sure that you're taking advantage of smarter and smarter devices, through leveraging Kubernetes and APIs, but probably more importantly, artificial intelligence that's already leveraging that so you don't have to do it one company at a time. And that's why I'm seeing in these new platform AI companies too. AI is more than just pattern recognition. And so I think that's the other key point to think about is, okay, artificial intelligence is great for looking at the company and identifying that there's issues, but hold a higher bar. I think having a very aggressive API and IoT strategy so that you're gathering a lot more information, a lot more data across your supply chain, your suppliers, your third party companies that you're working with, so that you can model and see how you can create more efficiencies is one part of it.

And then there's leveraging artificial intelligence to not only look for patterns, identify where there's true and false positive issues, But then how do you leverage it to actually remediate and solve those problems is something that the world's never seen or done before. And that's the opportunity that's right before us. I think we'll get into this over the next 12 to 24 months. And the companies that do this well will absolutely outperform and create a lot more shareholder value than the ones that don't figure that out quickly.

AG: I'm going to ask you now for your crystal ball moment. So using all of your experience in this area in tech and supply chain sustainability and supply chain mismanagement, what does the next 5 to 10 years look like? What's coming? And how can brand side sustainability leaders and procurement leaders, how can they align with investor expectations?

PA: Yeah, I think it comes down to being extra detailed about what your roadmap is. So it's your product roadmap, it's your operational roadmap, it's your risk. and compliance roadmaps. So making sure that within the company you've got these extremely well-defined, because the companies that are more rigourous than others are going to be able to make changes and institutionalise those changes far more efficiently. And it's frankly not as much about being the fastest, it's more about being the most effective with the changes and with the strategy that you're putting in place. Because once you get that well-defined and you're learning, then you can leverage technology and artificial intelligence to be better than your competitors. Sustainability is financial. And I think the more that we all look at the supply chain and sustainability strategies, as a financial decision for the company, I think that's going to also be healthier for everyone involved.

The world's data is not good enough for artificial intelligence to be a crazy positive impact in the next 12 months. You've got a couple of years to institutionalise in your company. But that said, if you don't take it as one of the top priorities in a company, then I think it's a mistake. It's very critical to tie that with your financial strategy for sustainability in your supply chain, coupled with this operational excellence and the roadmap associated with it. So that's the way I would look at this generation and kind of the next two to five years of what's in front of us. It's extremely exciting and it requires a really good strategy tied to just manic execution with check-ins on a regular basis, if not monthly, even weekly or daily, just to make sure that you're making progress across these different parts of your company where you've got the roadmap to find.

AG: Paul, thank you so much for sharing all of your insights and perspectives today. Really unique blend, I think, of direct investor perspective plus subject matter expertise in supply chain risk management and really, really interesting for me and I'm sure for the rest of our audience. Thank you for everyone who's taken the time to watch or listen to this. Please do check us out on eiq.com. Please follow us on LinkedIn to see what we've got coming next. And we look forward to keeping in touch. Thank you very much.