Ep 11 M&A ESG due diligence with Trista Chen

Intro: Hello everyone. Welcome to Sustainable Energy Asia podcast. I'm Yeo. And I'm Ben. Greet team Indonesia. Today we're receiving Trista Chen partner at E R M on the subject of e sg due diligence. Yes, Trita is leading the m a diligence practice at E R M in Asia. We are going to discuss about the definition of E esg, the e SG due diligence process, topics in relations to climate, finance, and specific guest studies. Before we move on with the show, we would appreciate if we could take the time to rate and comment on the show. It helps listeners to find us.

 Thanks and show.

Yiou: Hi tr, welcome to the show. Could you introduce yourself and, share your experience working in the E s G industry, in China and Singapore as well?

Trista: Sure. So thank you for having me. Lovely day today. So my name is Trita Chen. I'm a partner with crm. I look after our regional. Finance sector service within the firm. So how do I get to join the industry, which is very popular related to E S G? I think that goes back right after I finished grad school at the time, I had a degree of environmental management, environmental science, and I think, Many, many years ago, the topic of E S G was very much focusing on the topic of Iran health and safety related to the risk and compliance management.

So that's when I first entered the industry as a young consultant. And through the years, I think the attention of E S G got, Focus very much in a very different context nowadays when we talk about a topic when I first started. So I think this is where I reflect the journey of, my more than 15 years consultancy in the topic.

Yiou: Just to continue, could you talk more about e R M and, , your current role, as a partner within ERM

Trista: Yeah,

So E RM is the largest pure facility consultancy firm in the world. We have more than 50 years of history, currently e r m has location in more than 40 countries, 160 plus offices globally in Asia Pacific. We have, also been here for more than 30 years. E RM started, , as our name probably indicated more on the environmental side, but gradually expand to the full sustainability consultancy, supporting corporate clients or finance institutes through their, investment or project cycle.

 So we cover service anything from what I do most of the time in the transaction advisory related to m and a. To supporting clients in, for example, their, safety, performance transformation, their asset retirement, their corporate sustainability and climate change strategy, or down to technical greenhouse gas, , accounting, and all the way down to some, emerging topics. For example, digital solutions, if you name it. . And so I, I think this is very unique in terms of M'S position, what we call, , the boots to boardroom because we actually have experience on the ground working with clients at the frontline in their operating facilities, in their manufacturing sized, all the way up to the boardroom advising a CSU of the strategic position that they should take in the emerging climate change and E S G, , expectations that we have from the wider expectations.

Yiou: as you just mentioned, I think more and more companies, recently are responding to their sustainability ambitions, to build business resilience or to, , support transition, , to a low carbon future. So I recent discussion that quite heated have been focused on the E S G priorities.

first could share with us your understanding of E S G and maybe briefly define it.

Trista: Yeah, so it is a very good question because until now there is no universal definition of E S G, what it stands for. So when we look at that, I think, four or five years ago, mainly this is driven from the private equity, the private investors need of managing their investment risk. Associated with around the social and governance. And of course this topic is much broader now and cover a wide range of issues. For example, the what is happening now in the COP 15 biodiversity to the COP 27 related climate change. Those will be all the topics for under the E N G. And I think the reason where there is no single definition of what esg should cover is also because this is a unique topic that should be linked to the company's operation itself. So it's up to them to define what would be , the relevant material topics that they need to incorporate into the consideration to do with their business strategy, to do with their operation. So wisely redefine the ye anything to do with the environment, the broader. Atmosphere, climate change, bio water, to the more traditional environmental topics like pollutant control, air emission waste, water noise, all the way down to, environmental legacy issue, which is sawing groundwater contamination.

And that in the mid seventies drive the start of the whole industry due to, the cogenic , pollutants that have caused health impact on the individuals due to the pollutants. So this is where trace back to where the whole industry started. When it comes to as, obviously it's a social topic, anything to do with human being.

So the labor, the DE&I topics, the stakeholder engagement community, also down to the occupational health and safety of the. Individuals that is working at a company, so this is how we define the s and governance, as a name says that is ability to company, to structure the board or the management system that they have to set up to have overarching ability to manage that.

Depending on the industry, the G topics also can be extended to, the supply chain value, value chain management, for example, in the renewable energy, the solar, industry that we will now be talking quite a lot of, , how the company source their raw materials from the supplier. And then it's linking to some of the s topic, which is human rights in, the manufacturer fired. So I will say the topics is a fluent list that should be revisited regularly and then defined as the internal operation and also external expectation changes.

Ben: It's true that the definition of Syria has always been kind of like quite a topical issue and discuss, , widely. The Economist has published a few months ago an article which was a bit controversial, where they argue that Essentially we should replace E S G by E, but only standing, not for environment, but for emissions. And they put forward three critics, of, e s G finance , first being that there's a wide array objective and there is no clear guide to make any trade off. Second, that, , e er, g finance claim that actually good behavior can be re lucrative while actually in practice it is really profitable to socialize costs such as pollution with the society. , and sir, that. Not really a good measurements, , for e sg items. Essentially they're arguing, we should really switch that for emissions, , due to the imminent climate crisis that we are facing, which is the biggest challenge.

What is your take on the criticism that was put forward by the article?

Trista: I do think when the article came out. It catch a lot of attention, especially in the US climate now. A. Lot of backlash about E S G investing. I personally do think the three comments that article raised is quite accurate in the current, climate related to E S G, but I don't think the e sg should be narrowed down to emission because like I explained before that it is such a broad.

Range of topics that are very much relevant. And part of the charm of E S G is the lack of definition in a way that is up to the company to articulate why this one is important and give them the chance to position themselves and drive the action towards performance that they think is necessary. Is a little bit twisted is often when we have a set of expectation, we often will raise to the question, how should we perform and how should we be evaluated so that we know how we are doing. Where I think E S G a lot of time that it actually should. Expand on focusing why this topic is relevant to me.

How should I demonstrate my action that is driving to the performance and measurement should come to the last, which is a record. It shouldn't be overtaking the emphasize on understanding what would be the a years to topic the company should consider. Emission, at the end of the day, it's fundamentally important, but we can't forget that there are other competing priorities within our society. So it's not if we can only solve the climate change million dollar or billion dollar question that the civilization will move forward ? I don't think so. There are emerging paramount topics that we face now together, and it's hard to say that one is more important than the other. And then the E s G can be, , reduced down to one word because that is the most important topic. I do think that article points out. Good attention for people to realize that in the lack of, consistency, there are things that we originally need to perform to do together, but it doesn't mean that, that should give us the opportunity to scale back and only focusing on one single topic.

Because even for climate change, if you look at the loss and damage, , funding that got through in COP 27 is a huge topic linking to. Human rights linked to the social topics, right? So you can see that a lot of those topics are interlink with each other and sadly, or, or excitingly, depending on how you look at that, we have, no single solution to say that we can only solve one problem at a time.

But it has to be a collaboration effort with the tension from various body to drive the changes together. And I think this is where E S G has the beauty and has ability to address.

Yiou: As you just mentioned the key to the e es leaders the result . We can see how the company is conducting, or demonstrate their environmental and sustainability ambitions. In order to evaluate those E S G practice the result and outcomes of it, I think due diligence would do the work.

Could you please run us through a typical E S G due diligence process? For example, for m and a deal, and yeah, maybe give us a brief introduction on the lens of the process. For example, the skills required main attention areas and the maybe the typical challenges you might face.

Trista: sure. That is, , a question linking to the core, the heart of what I've been practicing in my whole, consultancy life as a due diligence practitioner. So I like to say, first of all, the need of e s G due diligence is not new. it is that companies has been conducting due diligence prior to their investment decisions for many, many years.

like I mentioned, when I first started my career, the focus topics were perhaps more on the environmental health and safety side related to the compliance and risk. But major corporate already have what they call a hundred day plan, which is still very common to work that different type of investor looking at Post deal to integrate a diligence finding into the due decision making.

Contractual negotiation. S p with the sell side, buy side, and then move into post integration. Because often we say that, in the beauty of m and a post deal perhaps is more critical than the part in the due diligence because that's when the changes can happen. But what's new with E S g due diligence is the result of the private capital that need to integrate ESG into investment decision making and hence is very much focusing on that when this topics, , let's spin off from the more traditional I amount health and safety and social due diligence that we've seen, on the market, from the client demand for more than decades. So the topic of E S G, again, it is, quite hard to define.

So the way we look at that, first of all, has to be linked to the transac. What is the context of transaction? What does the client need? What kind of request they have? For example, a private capital versus a private credit versus. , a venture capital that have, DFI investment.

The way we structure the due diligence will be slightly different because the nature of the client's different. Secondly, we look at the due dynamic. What will be the likely, assets, that we will have with the target company? Is that a public listed company? Is it auction deal? Is it a private company? Will we be able to have full access to the target, including management interview, document review, said, or is a very limited time that is allowed to facilitate transaction. So all of that is not unfamiliar in the m and a world. It's just that When it comes to the E S G, most situation that is the target company that we encounter they may not have a dedicated team in-house that look after E S G hence that we want to break it down to the nature of the operation and how they may structure themselves internally in corresponding for us to get the necessary information that we need to complete due D. The fun part of, , e ESG diligence now is that there is no one size fits all approach.

We will structure the scope, the approach, and then the deliver outcome depending on the client's need and transaction and see what's the best, how would we the best fit. And also one change that we noticed from the market comparing to where we support for the client five or seven years ago, is that we used to cover E S G or E Ss, due diligence with services almost a hundred percent on the ground. So for example, you have portfolio company that you want to invest. They have operation in 10, 15 countries with facility 20 facility. To the degree that is possible, we will have booths on the ground to actually visit those manufacturing facility. Cuz this is how you can understand the actual around health and safety and labor, social performance on the ground and how the performance are corresponding to if there is a corporate program in place for them to govern that.

But what has changed and also I think Covid facilitated that is the virtual working environment that one way we were forced to adapt because of covid. The other way is the type of transaction that's running now. Previously, we have an inside our approach that we get to see the facilities, to interview frontline workers, the shop managers to actually understand how the performance E S G are happening.

And then comparing to the corporate performance, but often now, the due diligence are an, outside approach. We would get information from the public domains, what we call the external review. Now this can be facilitated by digital solutions ai. So I think this is where the transformation of the E S G, , DD has happened

Ben: how challenging is it to gather information? Because I was discussing with someone who was doing scopes free management for a company and what she was saying was, in a lot of target or suppliers they have, they actually wouldn't have any information about that. So for three, they would use industry average to do the estimation. What is the quality of the data that you can gather from the target

Trista: very good question. So specifically when it comes to Scope three emission, I think I will step back and have a conversation with the client. What's the purpose of doing that? So if it's a private capital, they often would have their, fund level commitment that they have to know, or their commitment to their investors, and saying that what is the baseline emission that they have to go into before the investment decision and how that may affect the overall carbon intensity of the portfolio they're holding, right? But in an environment in particular in Asia Pacific where their lacks of regulatory contact to have companies to even report scope one and two. Scope three is an extremely challenging topic. And the second thing is that, across the Asian countries, there is no consistent greenhouse gas methodology. So we will be looking at, for example, Korea, Japan, China. They will use different methodology comparing to the international greenhouse gas accounting standard. So all of those will pose the challenge in the field solutions contact or in in any context, I think as a fund that want to get their portfolio companies emission situation.

So that gets back to the conversation with the client, understanding what is the objective, how much time, how in depth conversation that we will be able to have with the target company. How comfortable are they with using, not primary, which is proxy data to do the estimation, and then understanding the impact of such calculations on their decision making.

So it should be an informed conversation, decline to say, right. I hear you that in this contact chance of we getting qualitative data is very limited. and the result is likely over conserve the data, which may not be supportive in a due decision making or even drive the , value creation opportunity moving forward.

So I would recommend the clients, for example, is first of all, understand whether the target company in fact have their greenhouse gas ignition management capability. First, the system is there in place, do they focus or do they even cover scope one and two? In line with the host country regulatory requirement first, and then looking at what would be the opportunity to bring them into a higher level of expectation, including Scope three, rather than jumping and say that Scope 1, 2, 3 should be included because this is the trend, this is password.

It's not, not doable. It's just that the client needs to accept the limitation that such approach will bring to them, and then they can find this limitation still be useful for due decision. My personal take on due diligence is to do what is necessary and suitable and contributing to the deal rather than doing that for the sake of doing that.

Ben: Yeah. it's, It's even more strategic level decision on scope three just to manage and see how in the supply chain, , they can do some discussion and integrate that. So it's, I guess it'll be on the longer timeframe than only, , due diligence stage. , for sure.

Trista: Often in that case, I mean, scope three is not the only topic that we use, similar approach. We can often do a deep dive after the s p is signed before closing. So if this is, , a very important topic to the investors that they need to do before the transaction is completed, then we often can do it post diligence.

Postig prior to closing. Right? I think Ben, for your, , very familiar product finance where this approach is commonly adopted and used. And a lot of those what we talk about now in a e sg due diligence are not new. In the very mature, , m and a word is just the topics that hit the list of the priority will swap because the tension of the investor, the co client changes, and then like scope three.

Another topic maybe two years ago, and now we'll see arising more. That company will focus on that. And there are also the other topics, for example, product stewardship, which is a license tool to sell. And with the emerging regulatory Body is in Asia Pacific and European Union that is tightening that and also with the introduction of the product carbon, , which needs to lifecycle assessment to complete those kind of discussions will be very difficult to complete in depths and the due solution timeframe, I would do it in design. So there are different ways of structuring this in helping the clients to get to what they need to, and ultimately it's objective. What does client want and how is the due diligence approach? , topics are able to facilitate that and help them to drive the transaction moving forward.

Ben: N no, I want to move to another subject which. On ESG standards. And I think the discussion is also a bit related to how we define SG that we discussed cuz there is a fude of standards I personally have read a lot of e RM report on project finance deal. So I know, like on project finance, we'll be talking about the equator principles, the, I c , environmental, social standard, et cetera. in the due diligence words that you're performing, could you talk us about the major standards that you would be referring to and maybe discuss about what are the area of focus of these.

Trista: Sure. So, it's like an alphabet when it comes to e s g now, standard and framework. Fundamentally, how we will structure the due diligence, scope and approach is linked to the nature of transaction. So if there is a client's, investor then is a pure private capital background, and their LP do not have particular requests on their e S G performance demonstration, then we may often go to the basic, which is the host country regulations as applicable and then a SASB.

Why the SASB? Because it's. Linked to the sector and focus on the material topics. So we are able to reevaluate what would be the most valuable topics, and that's the standards that we use. But on the other hand, if the context of an infrastructure fund in Asia Pacific, similar to the project finance that Yaron works quite a lot with the bank.

Those would be the situations that we would use broader topics. For example, the standard like I F C performance standard, which is still one of the most comprehensive environmental, social, and health and safety performance standard, is widely accepted in particular. In non O E C D countries in Asia Penn and the reason of that is first of all, the nature of those projects are linking to larger infrastructure, can be greenfield development or project already in operation that will be subject to a higher risk of biodiversity, labor, higher risk of climate change. And I F C performance standard, provide a very good set of guidance in, in saying that if the company, having the management system in place, having done the necessary study to identify those risks and mitigate the risk.

So when we talk about standard. They are actually not a list of, for example, emission standards that they will say whether the pollutant discharge is linking to emitting the directory compliance or not, but is really looking at what will be the topics. The company should look at and what would be the management system that they should have in play to manage that.

So this is a typical way that we will approach this topic.

When it comes to how to perform the approach of any E s G due diligence are pretty standardized. We will normally do a management interview. Document review, including documents provided by the company themselves, informations that we can find from a public domain.

Then we will also do a preferably side visit to actually observe the performance on the ground. And then how is it aligned with, , what the company is set up to do. And then we can also extend this to be a more tech enable approach. For example, infrastructure project. We can Leverage microsatellite to be dispatched to the location where the project is and observe whether there is any environment and social and safety concern to do with the project location.

And this is extremely powerful if you have a highway project, the linear asset, because the site expands such a broad area that it will be very difficult even though you are boots on the ground to observe that.

And nowadays when we look at e s d diligence, we also would do benchmarking because company want to know how their targets performance. Comparing with respect to some of the peers, some of the customers. But, , it is important to know that when we do benchmarking, it is not actually benchmark at the actual performance, but the maturity, the engage.

Because now I think one of the challenge on E S G is that, there may be a disconnect between what a company does and what the company's performance actually is. So we are not relying only on what they disclose, but we are trying to find evidence of how they perform based on the actual data. So the benchmarking is looking at, for example, are the company disclosing the relevant E S G factors, aligned with the peer expect, customer expectation and how those disclosure is linking to their actual performance and whether there is a gap at the company. This often In the private sector, the company maybe doing quite well, but they're not disclosing it. So the gap is on the disclosure, but not on improving the performance and vice versa. So this is how we would be using different standards and different approach when we perform a ESG due D.

Ben: So essentially there's not one standard fits all and everything is really tailored to the target and the activity. Yeah. Okay. So that's really interesting. Now I want to discuss more about climate finance. So, Financial institution, whether the investment fund banks have a major role to play in the near future transition to allocate funds, , into the relevant area to allow us to, mitigate the temporary increase below to degrees and, over. Past years, there has been a lot of changes in the industry. I think it would be quite interesting if you could, let us know how that has impacted the approach that, financial institution, I'm thinking about firms or banks are, approaching the due diligence.

Trista: Sure. So definitely we noticed the change from the client expectation, starting from including the topic of climate change. So when we talk about climate change, there are a few topics that we need to understand. One is the existing climate risk to do with the investment opportunity, this can be at the corporate level and also at the asset level. So we are basically evaluating what would be the current risk that the company will inherit. With the transaction, and this can be including in the greenhouse gas baseline, the scope one and two, and and scope three, in a really ideal case. This can include a physical climate change risk with the current already happening hazard. And this can be the existing laws regulations, for example, in a European Union with the emission tradings in four, that is very much applied to certain sector of industry with the carbon tax kind of framework. So this is the one scope that we would look at.

The second portion will be the forward looking. What would be the forecast that the climate risk will increase or not based on reliable data. And this is more looking into greenhouse gas, the opportunity for the company to reduce their carbon footprint, through what kind of measures in place. The physical climate change risk is that whether the extreme climate hazard will increase, based on the, for example, the I P C C data, some of the assets may be considered as, undesirable or even becoming stranded asset. And then when it comes to the transition risk, which is very much aligned to T C F D with the market technology regulation, and reputation changes that whether there will be increasing transitional risk that companies should be aware of.

So the way we look at climate change due diligence is very much focusing on what the client's desire, outcome, what do they want to know, in the set of those topics. And again, link to the new dynamic, the limitations, the specific. The specific setup that we have talked about in due diligence, the how to best to structure this.

But when it comes to Transaction linking back to ISC performance standard or equity principle advice like the banks, some of the EP banks, we will need to refer to, the EP force latest requirement of doing a climate change risk assessment should certain criteria be met.

So that's at the project level. If you need more than thousand tons of carbon dioxide, then the c r a will need to be triggered, as part of the conditions. We see more and more clients are integrating this for the funds.

 For private capitals in Asia Pacific, the most common questions will be, physical risk because I think most are worried that whether those assets become stranded assets, especially if the infrastructure funds then is the inherit, , carbon intensity with the scope one and.

And those will be the most visible topics to be included in the due diligence given the current context with the shop timeframe. But I'm sure with, awareness increase with the company, with the society's attention on scope three and transitional risk. Those topics will be included in the Asian due diligence in the near future with company's ability and maturity to answer those questions in the DD will be picking up and that's when a meaningful conversation can happen to expand topics.

Yiou: Now let's move on to, more practical example. I noticed that in recent publication coordinated by Singapore Venture and Private Capital Association. You shared the case study of the E S G D D of e cosmetic company in greater China. Could you talk about this case and, , highlight key findings and where the DD created value for the investor?

Trista: sure. So that was a very interesting case. I think that was around two years ago when we first approached by this private capital. They were in the very short timeframe that they have to close the investment, before the target company, closed the last round of fundraising before IPO.

Often we get approached by clients, they will say that you have two weeks to complete. so time is definitely a, a luxury commodity. At a time when we approach, we were told that It is a private owned company. They do not own any manufacturing facility.

They are just starting their r and d activity. And they mostly rely on, if not all, suppliers on the market to manufacture their products, the packaging material of products and also the assembly. So this is setting the context and also it is a small company. That is, , fairly new

so it's sort of like a startup account and then become very popular because of the buying power of the consumer in integrated China and drive the demand. So with all that, we set the scope of the due diligence that the client will be able to provide us with very limited access to the company.

And because the nature of the company, they wouldn't have a large sophisticated team, to have dedicated e s G personnel for us to respond to that. So you can imagine this, outside in kind of approach that we gather information from a cock domain, in the set of e ESG topics, and we followed sasb performance standard and then local applicable China regulation and also, applicable regulation where the company export their products to. Because this is where the product stewardship kicks in, in the cosmetic industry. And when we structure the scope, it is come to our attention that.

Despite it is a light manufacturing industry. Some of the clients will say, well, the e s G risk will be very limited because they actually do not manufacture what could possibly go wrong. We, we realize that, because of the raw material that is used in the cosmetic industry, often those raw material will come with high E s G risk. For example, all the ladies would like to put all eyeshadows and this shiny, , glittering in holiday season that comes from a very specific mineral called a Micah. Myca itself has huge social risk, especially to do with mining activity in India. And then also there is the usage of some of the sheer butter of palm oil. the Way that they were planted, harvested, will have high e ESG risk. So this is when, an apparent E S G recently arrived because of the nature. Business. Even though it may not sit with the manufacturing activity itself, but because of the industry comes with that.

And also the second half of the business, that is the e-commerce. And I think, for us, those come from China. We know there's term code 9 96, which means that you'll start with nine to nine. You work six hours a day. And that is a social issue to do with overtime and also with ergonomic to do with staff retention, staff engagement. So we, we are expecting the company functional operate, but we also want to know how the company engage their staff from recruitment to retention? And then also the grievance process.

And the third nature is that because it's e-commerce and cosmetic, the way of they sell will be through online platform. We want to know whether there is any false advertisement in commitment. We were juggling how the company's advertising their product and whether there's a false commitment or potential discriminating issue that related. And last, but not the list because the company sell the products to consumers online.

How are the company engaging with their customers? is there any grievance complaints? And how are the company following out that? So those will be The key topics that we look at, which was as a result of the conversation with the client, rather than we come in with a set of checklists and saying that these other things need to check.

So the key finding is that because the company's very new, as a very lean structure, it has the attention to address certain of the ESG topics, but it's not a systematic way, to strategize that in a way that they can communicate that in terms of policy management, system, framework, and all, all the set of kpi they track.

And then the second part is that because it's such a fast happening industry, they were focusing more on how to access the customer but have not incorporated some of the E S G, let's say, raw material procurement process to the supplier. And also because they are relatively small, comparing to some of the key players on the market, they may not fail, that they have the leverage to tell the supplier that we would need you to procure or we select you based on those e s G considerations. So this is, apparent risk and also the challenge how they will be able to scale it up and put more leverage to the supplier in incorporating some of those, e S G considerations that is very key to their new investors.

The last part is that because the company was aimed for IPO. So when it comes to value creation, we all know that in different stock exchange, in particular in the Asian market like Hong Kong, China, or Singapore, there are a set of e s G disclosure requirements. So what we call this is how the company can be e S G disclosure ready? Pre I p o. But again, I'd like to emphasize that when we talk about ESG performance, it's not just to meet the disclosure requirement, checking the box, but aligning their strategy, their approach to meet those expectations. So we were mapping out what would be the expectation if they go listed in certain stock exchange market and then how the company can align their current performance to bridge the gap to the pre IP already.

Yiou: Apart from the customer

perspective

Yiou: in terms of ESG due diligence in this case study, I think another important

party

Yiou: in this. Whole procedure is the suppliers.

So as you mentioned, it's a asset light company without production line. The potential material risks are strongly associated with the suppliers In a way company's supply chain management ability, they could also impact the investors' reputation. The challenges brought along by the depths and breadths

the commodity

Yiou: used in this supply chain, plus tracing and monitoring of those various tiers of the production, those all would increase the difficulty of the evaluation. Could you describe how generally you're performing such due diligence to deal with those challenges, especially in terms of the supply

Trista: sure. So when we come talk about supply chain. We have many years of experience helping corporate clients to do supply audit. So again, the topic is not new to us, to e rm, or to most of the consultancy because we have done the similar topics and the different context for different objectives.

So when we first looking at supply chain due diligence, so including the topic of supply chain in the E S G D. We leverage what our compliance and assurance team have done for the corporate major clients. For example, the, apples, Microsoft BASF in different supply management program that is very mature on the market into the implementation of this supply chain to be included in the E S U D D and because the new dynamic that we've spoken about quite extensively so far.

We will want to know how the company have the awareness. First of all, are they aware of the need to manage supplier beyond quality calls and time and delivery schedule, but whether there is a sg component there? And then second part is that to what extent they have included this and tracking, monitoring, and then down to the supplier select.

And in particular for companies, for targets, if their product is relying on the handful of supplier, we will ideally ask the deal team to provide us, the top supplier list, and then we will pick a few depending on the strategic importance or let's say this is a sole supply on single product. We will sample a few suppliers, try to request whether we can at least get a management interview with the supply team. If not, then we will use external available information or supply audit reports, or sometimes the supplier provide, , products to more than one customers and whether the other customer supply audit report will be available. So this is how we would normally do that.

Yiou: You are in the industry for such a long time. So, when you started your career in sustainability, what is the one thing you wish you had known back then and, what is thing that you find the most unexpected today? This might be inspiring for the young consultant today,

Trista: good question. When I wanted to study environment, I still remember some of my family relatives, like, oh, why did you go to such a sad industry that, not popular, to go to IT banking. So I think one thing I wish I had known is that the belief or sustainability Is going to hit the mainstream.

And then in order to hit the mainstream, one key element is to how to engage your audience. So for the business context of decision making, this is see through it. So a lot of us that started in the environmental consultancy, we had a science and engineering background. So you can imagine a lot of studies focusing on analytical skills problem solving, but not much on the softskill with people, communication. So I think as a consultant, going through that journey, reflecting the sustainability topics which inevitably have to be integrated in any business discussion. It needs the audience and the audience are the people. So you need to know how the best to communicate with the people to bring your idea across the board. I think that's one thing I wish I had known back then.

The thing that I find the most unexpected is how popular, how this has becoming mainstream. Almost everybody is talking about that and people from cross-industry wants to join the sustainability, because they actually care about and driving the changes.

So I'm very glad to see, , the industry has transformed substantially and including the talents that we are able to attract, , from all industry joining us, because the passion and exceeded need of raising for sustainability for all of us.

Yiou: Yeah. Awesome. Thank you so much, Sheta.

Trista: Thank you.