ESG Trendsetters: How Applied Materials Prioritizes ESG Through Strategic Governance and Teamwork
00:03Welcome to ESG Trend Setters.
00:06I'm Mike Stiller and I lead new initiatives for
00:08our capital access platforms business at Nasdaq.
00:11Today I'm joined by Chris Libre,
00:13who is senior Director of ESG at Applied Materials. Chris, great to have you.
00:18It's great to be here, Mike. Thanks for inviting me.
00:21Great to kick up today's conversation.
00:23Can you start by sharing a brief overview
00:25of applied materials and your role at the company?
00:27Sure, Applied Materials is a company that The Wall Street Journal is called,
00:33the most important company that no one's ever heard of.
00:36What we do is we make capital equipment for the semiconductor industry.
00:41We make the machines that make the semiconductors that you use in all of your devices.
00:47And we also make displays as well.
00:49For advanced devices, chances are if you're using
00:54an iphone or watching me on some kind of a device,
00:59applied materials has touched many parts of that.
01:02The company has been in existence since 1967, which is incredible.
01:08In the last few years,
01:11we've really re amped.
01:14We've really revd up our attention to sustainability.
01:19And ESG and I joined the company in June of 2020.
01:24In July of 2020,
01:26we announced our 2030 goals and framework for ESG and sustainability.
01:31And then more recently,
01:33we launched a net zero playbook.
01:35So there's been a lot going on in the last three plus years.
01:39That's great. Maybe you can talk a little bit about why
01:43sustainability and ESG are important to applied materials.
01:47Well, the key thing that we see is that this industry is growing.
01:53People are highly dependent on semiconductors.
01:57We've talked about some of the devices, but there's a lot more.
02:00The average electric vehicle contains about 6,000 semiconductors in it.
02:06Which astounds me and I work in this industry.
02:09Right. And so you know,
02:11but you can't have renewable energy,
02:14you can't have clean energy,
02:15you can't have the transmission of power without semiconductors.
02:21So, this industry is growing.
02:24Plus there's, you know, things like AI,
02:25which maybe you've heard of,
02:27and autonomous vehicles, right?
02:30So there's a lot of data processing on the edge, as we like to say.
02:34The industry is going to double in size.
02:38Over by 2030, it'll be $1,000,000,000,000 industry.
02:44But one of the challenges of that growth is that if we don't take action,
02:50if we don't reduce our footprint,
02:52our footprint will quadruple in the same time period.
02:56Two X growth four X emissions.
03:00Not sustainable, not tolerable,
03:02given the situation that the planet is in.
03:05Well, that's great to hear.
03:07You're trying to solve those challenges.
03:09So how have you seen ESG and
03:12sustainability evolve in your role as the topics become more important for the company?
03:18Great question. I mean, I've been in ESG form applied materials for a number of years,
03:24roughly 15 years in total.
03:26And it has evolved tremendously over that time,
03:30including these last few years here at Applied.
03:33And what's really changed a lot is that
03:37ESG has become central to the company's strategy, number one.
03:42Number two, it's become, I think,
03:44one of the great ways to bring the company together.
03:47So if we talk about net zero for instance,
03:50it involves nearly every part of the organization. All right?
03:54We need to have supply chain,
03:57our product design, our interactions with our customers.
04:03You think about it, Sales,
04:05R and D. Supply chain,
04:09logistics, supply chain, materials.
04:12It's really quite a comprehensive effort,
04:15and most ESG teams like mine are reasonably small,
04:20small and mighty, some people would say.
04:23And so you know, but still we really need to rely on
04:28the organization and the connectivity across the organization to get things done.
04:33Yeah, it is a team sport as they say.
04:37Can you share a little bit about your top areas of
04:41focus for the strategy and how that's changed over the last 12 to 18 months?
04:46And anything you'd say in terms of specific KPI is used to measure success.
04:51Yeah, Well, definitely the addition of net zero which we
04:54announced our net 02040 playbook in July of 2023,
04:59So only a few months ago.
05:01You know, that has definitely become a priority.
05:04So what I would say this next few months is about is building that.
05:10Network of people within the company.
05:13The connectivity that I referred to earlier to get moving forward.
05:18Right. So it's a little bit,
05:21and I'm not a big fan of ven diagrams,
05:23but if you think about some of the things and how they
05:26overlap product design and supply chain,
05:29product design and customers, all right.
05:32You know, there's a number of things that we need to do within our own scope.
05:381.2 we're talking about scope three as well for net zero.
05:44And getting that organization embedded,
05:48getting the folks working together,
05:52making progress against the milestones we need to make.
05:55Because 2040 seems like a long time away,
05:59but a it isn't.
06:01And we need to make progress every year.
06:05We don't want to leave this so that we're
06:08scrambling in ten years to try and make the progress we need to.
06:14That's number one for me. Number one is getting clear
06:18about what our objectives are each fiscal year.
06:22And then building the teams that will help to deliver
06:26those objectives and to do that in a collaborative way.
06:31Got it. This program is called SG Trend Setters.
06:34How do you see your focus changing over
06:35the next 12 to 18 months or maybe staying the same?
06:38I think we will definitely keep our foot on the pedal for those things.
06:43We've done a great job on
06:45the more 2030 goals that we've set for ourselves of building those teams.
06:50I'm confident that we'll be able to build the teams going forward.
06:54For Net zero, we've embedded our annual milestones into our corporate scorecard,
07:02Which is used not only to report progress
07:06internally by our CEO in say, all employee meetings.
07:11But also it helps determine
07:13executive bonuses or annual incentive plan as we like to call it.
07:18So that's something we're going to keep and keep building the muscle memory,
07:24keep building the connectivity as we go forward.
07:27But I think increasingly we're also going to start to look at
07:30some of the more pioneering aspects of net zero.
07:34Because the assumption around net zero is that there will be some emissions, right?
07:40We may be able to reduce, in fact,
07:42we have to reduce our emissions from where they'll be in 2040 to the 1.5 degree pathway,
07:50but there's still some residual emissions.
07:53There's a lot of coal technologies and approaches to carbon removal.
08:00So I think that's something that we're going to
08:02increasingly turn our attention to because even
08:05though it's in 2040 that this really has to impact,
08:11You know, we want to be able to sort of pioneer those approaches.
08:15And some of those approaches,
08:17if it's nature based solutions,
08:19require, you know, five to ten years to embed themselves.
08:23Right. And to have the impact that we will need them to have.
08:26Yeah, well, speaking about pioneering,
08:30you've come a long way as a program.
08:32I'd love to hear if you have any advice for
08:36other issuers looking to tell their best ESG and sustainability story.
08:40Yeah, I mean, you know, it's funny, it's ESG, right?
08:45And obviously environmental, social, and governance.
08:48And a lot of times I think the governance piece gets a little bit ignored.
08:52So I think my advice is really spend the time to build those teams and
08:58to create that connectivity within your organization because we've got a network applied,
09:05applied, a company of tens of thousands of people,
09:1030 or so thousand people at the moment.
09:13But there's a good 100 or so across
09:16the organization that are working directly with us on ESG.
09:21And those 100 or so SM's increasingly are part of the process,
09:26whether it's reporting or our 2030 goals or the net zero playbook, right?
09:36So getting that team together and getting them working
09:39with each other is all part of governance.
09:42So one of the first things we did was we set up an ESG leadership council.
09:47And that leadership council has visibility and also responsibility for,
09:52you know, all of those milestones and what we're trying to accomplish.
09:56That makes a ton of sense. You brought up the point around
10:00100 SM's across the organization collaborating.
10:03Can you talk about that team effort a little bit more?
10:06Can you share a little bit more about how
10:08applied materials addresses the distributed nature of the team,
10:11as well as maybe the structure of your team specifically?
10:15Yeah, well, I mean my team,
10:17I'll start with my team first.
10:19So my team consists of there's four of us in fact,
10:23and two of the team are focused on our climate strategy.
10:28So we have a climate program manager and a sustainability engineer who works
10:32to not only measure our footprint but also assure those data, right?
10:38So the data that go in our report are assured.
10:41And then also we're working on
10:43our climate strategy in terms of not just the net zero playbook.
10:47So we did a lot of the modeling for that and
10:50we're able to put that forward to senior management for approval.
10:54But also what are our plans for renewable clean energy?
10:59We have an aspiration to get to 100% renewable energy by 2030.
11:04That obviously involves not only investments,
11:09but also discussing those investments with
11:12our finance colleagues. That's one part of my team.
11:14Another part of my team is more focused on the reporting and the S,
11:19I have a program manager who leads on human rights,
11:25on diversity, and inclusion on communication,
11:29on reporting, because we want the world to know what we're doing.
11:33We produce a sustainability report every year.
11:37That's her responsibility, that's what we do, it's our function.
11:43But those 100 or so SMEs are working in just about every part of the organization.
11:49From HR, diversity and inclusion to community affairs Applied invests
11:56significantly in the communities where we operate to R and D, our products.
12:04As I mentioned earlier,
12:05we make capital equipment.
12:07The capital equipment can be more
12:09efficient and we have objectives and aspirations there too.
12:13So there's a R and D team that's quite central to that supply chain.
12:19And then many of the functions across the organization,
12:23our sales teams, our services group.
12:27One of the things we provide to many of our customers
12:30is we service the equipment that we've sold them,
12:35not only in terms of spare parts but also in terms of upgrades and efficiency upgrades.
12:41Right. Lot of moving parts to this operation,
12:46and the more we build those connections,
12:50the more we learn about them and actually the deeper we get.
12:55I guess another piece of advice I'd give others is, you know,
13:00you're on a journey, you're not going to get there in six months.
13:04For us, it's been a good couple of years as we started to feel
13:10these connections building and more information
13:14becoming clear to us about a fairly complex business, right?
13:18So here we are,
13:203.5 four years later,
13:22and I can really feel the momentum behind that.
13:26That's wonderful to hear.
13:28You talked about the sustainability and ESG being a journey,
13:33How you sought to develop your ESG and sustainability skill set.
13:38Well, you know, one of the great things about ESG,
13:40and I've felt this throughout my time in this space,
13:44is that it's kind of noncompetitive, right?
13:47Obviously we all want to do well,
13:51we all want to distinguish ourselves,
13:53but there's a lot of collaboration possible.
13:56And one of the key things I
13:58think in terms of building a program is to see what others are doing.
14:03And access to information,
14:06access to who the leaders are.
14:09Whether those leaders are
14:12the really notable companies that get attention for sustainability.
14:17I don't necessarily need to name them all, but you know,
14:20you can imagine who I'm thinking of like Nike, Unilever.
14:24I mean, they're not even in my industry,
14:26but I do admire them and watch what they're doing.
14:28But more importantly, you know,
14:30my customers and my competitors, right?
14:33So I want to see what everyone's doing, what's important to them.
14:37You know, increasingly customer commitments and many of
14:42our customers have net zero commitments really drive what we need to do.
14:48Not just because we want to satisfy the customer,
14:52but also because it really changes the dynamic of
14:55our relationship with them and we can get into deeper discussions with them.
14:59Market intelligence, the short version of the answer.
15:04The market intelligence is absolutely critical in this role.
15:08And helps you not only do a better job,
15:11but also helps you, I think,
15:13commercially, right, when you're dealing with customers.
15:15Chris, thank you so much for sharing how applied materials is,
15:18setting the trend on ESG.
15:20I know our audience appreciates
15:21your insights and the profound impact you're able to make.
15:24I'll leave it there for today,
15:26and I look forward to having you all tune in
15:28again for our next ESG trend setters episode.
15:30I want to thank you Mike, for the opportunity to speak with you.
15:34It's been a pleasure, and I really look forward
15:36to continuing our work with Nasdaq in the future.
