Transcript by Kensho.

Lindsey Hall: I'm Lindsey Hall, Head of Thought Leadership at S&P Global Sustainable1.

Esther Whieldon: And I'm Esther Whieldon, a senior writer on the Sustainable1 Thought Leadership Team.

Lindsey Hall: Welcome to ESG Insider, a podcast hosted by S&P Global, where we explore environmental, social and governance issues that are shaping investor activity and company strategy.

Esther Whieldon: We're nearing the end of COP27, the big UN Climate Conference in Egypt, where governments are negotiating thorny topics such as climate adaptation and finance. COP27 has also provided an opportunity for organizations and governments to announce new initiatives and plans.

For example, the First Movers Coalition committed $12 billion towards zero carbon technologies. The First Movers Correlation was launched by U.S. President Joe Biden and The World Economic Forum during last year's COP26 gathering, and that was to decarbonize heavy industry and the long-distance transport sectors that are responsible for more than 1/3 of global emissions. The coalition is made up of 65 companies today with a collective market value of about $8 trillion.

Lindsey Hall: And last week, the Biden administration also released a proposed rule intended to protect the federal supply chain from climate-related risks. This would require major supply contractors to disclose their emissions and climate risks and to set science-based climate targets. The rule would cover about 85% of the emissions associated with the federal supply chain. That's according to the White House.

In today's episode of ESG Insider, we're continuing with the theme we explored last week, asking how companies can decarbonize their supply chains. The emissions that occur up and down a company's supply chain and when customers use the company's products are called Scope 3 emissions. And these can be difficult to measure and manage because they occur outside the company's direct control.

Esther Whieldon: Today, we're going to hear directly from 2 major companies about their supply chain strategies. One is Walmart, which is one of the world's largest retailers; and the other is big multinational power company Ørsted, which is Denmark's largest energy company. Both companies have set targets for the supply chains.

Lindsey Hall: Walmart aims to have zero emissions in its operations by 2040, and it's engaging with suppliers to reduce or avoid supply chain emissions by 1 billion metric tons or 1 gigaton by 2030. Walmart calls this initiative Project Gigaton. And Ørsted is moving to make its entire value chain, or Scope 3 emissions, carbon neutral by 2040. As we'll hear today, these companies have broad ambitions that involve wholesale changes to supply chains across multiple sectors, and they say that to drive progress toward climate goals, there needs to be collaboration across silos.

To understand Walmart's strategy, we'll be talking with the company's Executive Vice President and Chief Sustainability Officer, Kathleen McLaughlin. And for Ørsted's plan, we'll talk with Virginia Dundas who is the company's Head of Strategic Environment Programmes.

Esther Whieldon: First up is Walmart. Kathleen told me Walmart is engaging across all of its supply chains, from agriculture to electronics, to create systemic changes to the way that products are produced and consumed in both the short and longer term. By the way, you'll hear Kathleen mention the term forest conversion. Forest conversion refers to when forests are cleared to be used for other purposes such as growing food crops or mining.

Kathleen McLaughlin: So we work with our suppliers on sustainability writ large. So maybe just to put this in context, we work with suppliers across categories. It's everything from produce, meat and dairy, packaged goods to apparel to electronics, you name it, the categories that we sell at Walmart to improve sustainability of the products that they make and that we sell to our customers. And we're tackling several big aspects of social and environmental sustainability with them. So climate change is certainly one, and I'll come back to that, and that's really what we're talking about, emissions, it has to do with that.

We're also working on nature and the role that product production plays interacting with forests and oceans and grasslands and so on. We're working on circularity or waste of packaging as well as products so that the materials that people use to create products get reused, repurposed, recycled and that really we can live within the limits of materials for the things that we sell.

And then issues that have to do with people in supply chains, and so that's creating economic prosperity for people who work in supply chains. Every item that we sell comes from a company that, in turn, employs people, and that's a tremendous boost for people. So the ways that we can help elevate prosperity for suppliers and people who work in supply chains and then also working across supply chains and also with nonprofits and governance and other society around the world to tackle some of the biggest challenges facing people and supply chains, even things like forced labor and seafood or working conditions in agriculture, smallholder farmers in places like Mexico or India and so on.

And so it's a pretty big agenda around environmental issues and social issues that vary from category to category. So the kinds of things you might work on in apparel will be different from what you might work on in produce or in beef or in electronics and so on.

And there are a number of ways that we work with suppliers to make progress on sustainability of products. And really, our ultimate goal is to make the everyday product that anybody might buy the sustainable choice. We're trying to make sustainability mainstream. We're trying to make it the norm, not something special that people have to save money to go afford. We're trying to transition the way that products get produced in general. So it's really for the retail and consumer products sector overall. So we're talking about some pretty deep-seated change in consumer products, in industries, and it's not even just business, it's working with governments and civil society.

So the ways that we would engage our suppliers to play a role in this are, first of all, setting standards and requirements for the products that we source. So for example, we have supplier code of conduct, there are expectations around standards on the environmental issues as well as social issues that we expect suppliers to meet. We have responsible sourcing programs and audit programs that ensure compliance. That's a really important part of the way that we would engage suppliers.

Second is going beyond that to work with suppliers to share best practices, to take new initiatives, to innovate the way they're producing products, to measure and disclose. And one of the ways that we do that, when it comes to climate change, is Project Gigaton, and I'll come back and talk about that in a moment.

A third way that we work with suppliers is through industry consortia. And these would be opportunities to accelerate action by working together. So for example, The Consumer Goods Forum, we're working with other retailers and the suppliers around plastic waste, for example, around deforestation.

A fourth way that we engage suppliers is really by helping customers understand what's in the products that they're purchasing and make informed choices. So that might be through labeling. So for example, we have a How2Recycle Label program that helps people know what to do with their packaging; a Great for You program, which is a nutrition standard and labeling on items that meet a nutrition standard; certifications, Marine Stewardship Council and so on. So it's really helping the customers see and make choices.

Another way that we work to accelerate change with suppliers and through a retail sector is through advocacy, advocating for public policies that will help the transition towards sustainability go faster.

And then finally, we also work through the Walmart Foundation and through philanthropy to make investments in pilots or research that are helping uncover new approaches, conservation activities, different programs and certification standards that will help society, in general, make progress on sustainability.

When it comes to climate and working with suppliers, we launched a program, back when we set our science-based target, called Project Gigaton. And the goal of the program is to enable suppliers to reduce or avoid or sequester a gigaton of emissions by 2030 through practical actions. And we were really focused on helping people change the way that products are produced or consumed now to start getting immediate impact, to start getting immediate reductions in emissions. Because although we all have long-term goals, I talked about by 2040, we want to get emissions in our own operations down to zero and we're chipping away at that, we really wanted to encourage innovation and action now because of the need for immediate reductions in emissions.

And so we created this program to help suppliers, first of all, identify actions that they could take to decarbonize in their supply chain; second, to give them some tools and support to help them go faster; and third, encouraging them to report and disclose so that people can see where the progress is, people can learn from that, customers can see that. And really, we're trying to create a broader cultural movement around emissions reduction.

So there are 6 arenas that were encouraging suppliers to work in. And those are energy, so for example, renewable energy, energy efficiency programs, really making a transition around the energy people are using for their factories or transportation and so on; second, waste, so reducing waste, whether it's in food production or in packaging or other kind of materials because any of those are also sources of emissions; third has been regenerative agriculture, so adopting practices that improve soil health, using cover crops, no-till agriculture and so on, which not only can be shown to avoid emissions or even sequester emissions, but there are also some other benefits around biodiversity, water quality, preventing nutrient runoff into rivers and watersheds and so on; forests, so we've been focused on helping people avoid conversion, especially in critical commodities, such as soy or palm oil or beef, coffee, tea, conservation programs, restoration programs or reforesting which helps sequester emissions; packaging changes, so adjusting the materials that are used, reducing packaging outright, shifting to better materials that are lower-carbon materials as well as could be reusable or recyclable; and then finally, the use and design of products is another arena.

So those are 6 different arenas where we've set up working with nonprofits, and we have a group of nonprofits, including Environmental Defense Fund, World Wildlife Fund and others, to create what we call calculators. These are super practical ways that suppliers can identify actions that they can take in their business, and the calculators translate those actions into emissions reduction based on the science.

We now have 4,500 suppliers that have been engaged in Project Gigaton in identifying projects, working on them, reporting emissions improvements. And to date, the suppliers have reported over 500 million metric tons of emissions reduced or avoided or sequestered. So it's a little over halfway to the goal, which is pretty exciting.

Esther Whieldon: Has Walmart had to make any sacrifices or trade-offs in pursuit of decarbonizing the supply chain?

Kathleen McLaughlin: Decarbonizing in society is one of the great challenges and movements of our time. We're really talking about massive transition. And so in any big transition, think about the energy transition, that's a big part of what we're talking about here, and listeners will know, depending on where you live, you're living it now, right? That transition from a fossil fuel powered economy to a renewables economy, all the things that need to change along the way, not only in terms of generating energy but distributing energy and if you're shifting into renewable sources, let's say, for transportation, for mobility, for trucks, what's the charging infrastructure that you need to support that and so on.

So there are challenges everywhere based on that kind of transition. I think what's exciting is the ability of suppliers and Walmart to bring our best creative minds to these issues and through innovation come up with solutions. And I think that's why we have such terrific momentum.

Initially, when people started working on this, many of them gravitated toward that energy pillar because it seemed the easiest. And a lot of folks were working on energy efficiency. It's very easy to work on energy efficiency. It generally is immediately paying off in terms of cost reduction. That was easy.

Now folks are getting into things like renewables; or in transportation, shifting their vehicles to alternative sources of fuel; or in packaging, innovating to get out of certain materials and outright reducing packaging or going into reusable packaging. All of those are much more challenging, but it's where things are going and where people want to go. And so we now have people participating across all of these pillars.

I mentioned the nature pillar, which is really about agricultural practices and forest practices. We had over 500 suppliers engaged in that this last year. When we started the program, I think you could probably count them on a couple of hands, right? So things have really evolved and matured as we've gone along.

And one of the things that we've really focused on is helping to provide support to suppliers. So it's not just target setting and reporting but programs that will help suppliers go faster. So I'll just give a couple of examples.

One is we did something with Schneider Electric called the Gigaton Power Purchase Agreement program, which we developed in 2020, to help our suppliers who are engaged in Project Gigaton get access to renewable energy because not everybody has a procurement team, that might be a challenge if they haven't done a renewable procurement before. And so this is a way for people to tap into that.

So just last month, for example, there were 5 suppliers. So Levi Strauss, Amy's Kitchen, J.M. Smucker, Valvoline, Great Lakes Cheese, they've all come together to participate in this procurement program, and they're going to be taking renewable energy from the Ørsted sunflower wind farm in Kansas. So that's just one practical example, packaging playbooks that we've researched and provided to people and then we work with them to help them make the transition.

Or financing. We have worked with HSBC since 2019 to create something called the Sustainable Supply Chain Finance program, which provides access to finance for suppliers that are engaged in Gigaton, in at least one of our pillars that I mentioned, so energy or packaging or product use and so on. And if suppliers are engaged in that and set science-based targets or received a certain minimum score from CDP, which rates companies based on their climate change work, they can get early payment of invoices approved by Walmart through HSBC. And they get favorable pricing in terms of capital, access to capital.

So we're trying to find ways to make it practical, to make it exciting for people, to encourage them. As of this past year, so last year's results, we had over 70% of our sales represented by suppliers who are engaged in Gigaton. So a vast majority of our business is covered by suppliers engaged in Gigaton. Because companies, just as we are, are facing the same expectations from customers, from their employees, from civil society, from stakeholders in general, from investors, to really lead on climate. And there is value to be gained in that. There's growth. There's business advantage. And people see that. And so we're pretty excited about the momentum.

Esther Whieldon: I asked Kathleen how Walmart weighs the cost of its sustainability practices against the need to keep down costs for its customers.

Kathleen McLaughlin: Our philosophy is that the everyday choice ought to be the sustainable choice, and the sustainable choice ought to be the everyday affordable choice, and that's where our focus is. So in the same way we would innovate in product development, in engaging suppliers in supply chain development to try to improve the value for money on any kind of issue, is the same with emissions.

And what we found so far is that as often as not, the innovation that will lower emissions also removes waste or a cost. So for example, in agriculture, optimizing fertilizer, reducing the amount of fertilizer that you're using in areas on the field where you don't need it and so on actually saves farmers a lot of money. Or improving energy efficiency, also very accretive or, even now, renewables in many jurisdictions are actually more favorable from a cost perspective versus traditional fossil fuels.

Just a couple of practical examples are our Mainstays Outdoor Pillow. So that's a pillow that we designed to be made of recycled content. Each pillow has over 17 plastic bottles converted into the fill. It's diverted over 30 million bottles from landfill across that item alone, just given the volume, and the cost of that pillow is $5.

So that's really the challenge of our time is what's the innovation that is going to help us transition our society to a low-carbon future. It's a bit of a myth that that's necessarily more expensive. There might be some aspects that are more expensive and some that are cheaper. And through innovation, how do you bring things together in a way that keeps things affordable for people. And so that the way we live in the future is different but it's not necessarily a more expensive way to live. And in fact, if you think about goals around circularity, living in harmony with nature, repurposing and reusing materials, it's a lower waste future and, ultimately, a better solution.

Esther Whieldon: As you just heard, Lindsey, Walmart is pushing for big changes to its supply chain emissions on multiple fronts. Two things, in particular, that Kathleen said really stood out to me. One is how Walmart aims to make sustainability mainstream, which she said will require deep-seated changes to consumer products and industries, and it will also require engaging with governments and civil society.

Another takeaway for me was how Kathleen pushed back against this idea that the low-carbon transition will automatically make things more expensive. She said innovation and sustainable practices will help to offset the cost of the low-carbon transition.

Lindsey Hall: Okay. So the idea is that we're going to need system-wide transformation. And I think our next guest is well placed to talk about that. As you'll hear in my interview with Virginia, Ørsted has completely reinvented itself in less than a decade.

Virginia Dundas: Ørsted is in the business of fighting climate change. We do that through -- because we provide decarbonization solutions to all of our customers, whether they're governments or private customers, and we do that across different technologies, offshore wind where we're the leading company out there responsible for 1/3 of installed capacity; and we also have a business and activities within onshore wind, solar and Power-to-X and green hydrogen.

And I think that one of the things that I think everyone should know about Ørsted has been the company has -- it has been the energy company in the world that has transformed from fossil fuels to green faster and really, really efficiently and successfully in the world. Ørsted has transformed from being a company fully dedicated to fossil fuels to being a company fully dedicated to renewables in less than a decade. And it has done it so successfully that it has built a business model that is sustainable both in terms of what we deliver to society, we deliver green energy, but also make our business profitable in the long term.

Lindsey Hall: Okay, so big transformation. Can you talk to me about what challenges have you encountered along that route?

Virginia Dundas: Yes. So as I was telling before, so Ørsted today is a leader in renewable energy. But 10 years ago, it was a different company. 10 years ago, Ørsted was known as the most coal-intensive energy utility in Europe. And it was a company that has upstream oil and gas activities, and it was fully dedicated to fossil fuels.

In less than a decade, and also very, very sort of forwarded and prompted by an increased interest in society for the need to sort of fight climate change and a lot of also sort of signals from the EU and the new government that renewable energies were going to be part of the energy mix in the longer term, the company decided to transform.

The company, at that point, 10 years ago was under a lot of significant bottom line pressure. We were not making a lot of money, and we have a -- our business model was essentially a dying business model.

So we and the leaders there, we needed to think what to do to stay and to make the company stay relevant in the long term. And what happened there was that the leaders decided to make and to kickstart this big transformation that the company has sort of completed in the last decade.

And one of the most difficult things or challenging things that you do when you do this kind of transformation is that you need to sort of look at doing some near-term sacrifices to give way to longterm profitability and long-term sustainability. That is one of the key sort of challenges that were part of that transformation back then.

And the other one is also that you are sort of, as a company, jumping into maybe, let's say, a total new industry without really, really knowing if that's going to be picked up. Back then, when the company started the transformation, offshore wind was a very, very niche industry. There weren't actually any or many offshore wind farms built around the world. But Ørsted was the first one, the first company, that ever built the first-ever offshore wind farm in the world. That was back in 1991, and it was off the coast of Vindeby, a very, very small town of the coast of an island in Denmark. And the company decided, because it had that actionality and it had that little knowledge around a technology that was niche, they decided to sort of say, okay, this maybe can give us a front-mover advantage. So they decided to sort of say, okay, how about we start investing and see if we can scale it up.

The second and the third thing around that was that it was – nascent, so it was expensive. So we needed to find a way of making renewable energy. And back then, offshore wind, cost competitive in relation to fossil fuels. So the company kickstarted a program working with suppliers, but then it was about reducing the cost of offshore wind. Today, we're working with our suppliers to reduce emissions across the supply chain to really sort of start and make it cost competitive.

And 2017 was the year where the balance tipped. It was a year where offshore wind became a much more cost competitive technology than any new coal-fired power plant or any new fossil fuel power plant being built in the most of Europe and so on. And today, offshore wind, and today, renewable energy is much more cost competitive than any other fossil fuels in almost 2/3 of the world.

Lindsey Hall: That's great. I have a lot of questions about your decarbonization approach, but I did just want to follow up on one point you made, which stood out to me, which is this idea of having to make sacrifices. We talked a lot on this podcast about the trade-offs that are necessary in the energy transition or the balancing act that needs to happen. What do you mean when you talk about sacrifices?

Virginia Dundas: What I mean is that the company has to move boundaries of concerns from the near term, from the next quarter to the longer term and really, really think what decisions needed to be made back then to make sure that there was a company operating and being successful in the long term. And essentially is that, if that transformation had not happened, if the leaders in Ørsted had not taken that decision 10 years ago, I wouldn't be sitting here today talking to you actually.

And that is actually what I mean. It requires that you move the boundaries of concerns and you make some decisions and trade-offs that might affect your balance sheet the next quarter but that will give way to long-term profitability and long-term strength of your business model.

Lindsey Hall: Thank you. Okay. So can you talk to us about Ørsted's plan for achieving its goal of having Scope 3 emissions be carbon neutral by 2040.

Virginia Dundas: Yes. I'm happy to do that. And the story starts essentially with Ørsted's transformation story. Through our transformation, we have fully decarbonized almost over -- we're very well on track to decarbonize around Scope 1 and 2, that is around energy generations and operations. We're going to do that in 3 years' time, by 2025, and that is our first target, to decarbonize our Scope 1 or 2 emissions in 3 years' time. And when we do that, we will be the first energy company to achieve that transformation from fossil fuels to green energy so fast and well ahead of what science demands.

And being very well on track on that target, a little over 2 years, 2.5 years ago, we took a decision to sort of look at our next frontier in our decarbonization journey, which is, as you mentioned, are our Scope 3 emissions. And for that, we set at ambition to be at net zero by 2040. And that is to do it even well, well ahead what science requires on that regard.

And that is a very, very bold ambition and a very, very bold target, even considering that when you look at where the most -- where hotspot emissions of, let's say, offshore wind or an offshore wind farm, you will realize that the vast majority of emissions are associated with the materials that are being used and the different components that go into wind farm. And those materials are heavily manufactured and are very carbon intensive. And that includes, for instance, steel, concrete and other type of materials that also are known as difficult to abate at the moment.

And the second largest source of emissions in our supply chain has to do with the fuel used by the vessels that take all of the different components that go into a wind farm and install it offshore. So basically, this target is quite ambitious, but it's extremely challenged to get there because we're dependent on the decarbonization of this very carbon-intensive sectors to do that.

And then that brings me to the first point in our plan, so how can we do that? This is not something that we can do on our own because the decision is not on our own and the plans and the investments cannot be done on our own. We need to work together with our suppliers to be able to deliver on this target. And that is why, again, a little bit over 2, 2.5 years ago when we launched our target, we also launched a program to engage with our strategic suppliers in the most intensive categories of our supply chain to find ways of helping to decarbonize our supply chain.

So the first thing in our plan was to engage in dialogue with our suppliers. And what are we doing on that? That is basically to really understand where they were on this journey, to understand their pain points and their strengths, also to create a shared ambition around it. If we are to succeed, this requires collaboration. That is a key, key pillar also of our program, of working to decarbonize our supply chain, collaboration and understanding that it's not one company's problem, it's not an Ørsted problem, but everyone has to chip in and play their part.

Lindsey Hall: Virginia talked about the importance of what she called "demand signals," in other words, sending signals to suppliers that it's okay to take the necessary investments in the green transition because there's going to be a buyer down the line for their products. She said Ørsted achieved this by joining forces through cross-sector collaborative initiatives with other buyers that make use of the same products that the company uses or the same materials it has in its supply chain, like steel or concrete.

One recent example, that First Movers Coalition we talked about at the top of the episode. During COP27, we heard the First Movers Coalition has grown from 25 to 65 members in a year, and that includes companies and governments. And Ørsted is one of the founding coalition members of the cement and concrete sector. I asked Virginia for examples of when this kind of cross-sector collaboration has been successful.

Virginia Dundas: I think there are 2 ways in which we're collaborating. One is that we're working and collaborating and engaging with our suppliers, and we do that through dialogues that we drive together with our procurement organization. And we do that with the most critical and most important suppliers for the pipeline of projects that we build.

And when we started this dialogue, so 2, 3 years ago, we were a little bit -- we didn't know how this was going to be taken because 3 years ago, the world was in a different stage in terms of understanding the climate change crisis, in terms of understanding how to collaborate on these things. So we didn't know how that was going to go. And the dialogue was extremely, extremely well received. And we did that engagement around 3 levers, just to stand up, sort of send and give suppliers a little bit more concrete guidance into what we're expecting of them and on how to get started on the decarbonization journey.

And the first one was very simply to disclose -- to measure their own emissions and disclose their current emissions publicly and using CDP supply chain. The second one was to integrate green electricity, one of the technologies that today is mature and available in the market, to start decarbonization and to do that by 2025. And the third one was to create and build road maps for decarbonization long term.

And through this sort of 3 levers, we have had a great engagement with suppliers around that. And what has happened is that, in 2 years' time, we have been moving from basically less at 1/3 of our strategic suppliers that we're engaging with measuring and disclosing their emissions publicly to almost all today are doing that. And we've been going for, basically and virtually, none of our suppliers having plans or having set science-based targets to over 1/3 right now that either have set a science-based target or looking into setting a science-based target. And we went also from a little less than 1/3 of our suppliers also looking at using green electricity as one of the technologies to help in the decarbonization journey to today almost 2/3 and growing the number of suppliers that are doing that.

So I think what we found is that it's a very simple engagement and very simple dialogue around what does it take to get started on decarbonization can have a really, really, really impactful outcome, so it can really, really help create change on that. And we also have suppliers that today are also sort of building a supply chain program of their own based on the inspiration of the engagement that we've been doing with them.

Lindsey Hall: Okay. Those are the success stories. But what about the flip side? I asked Virginia what challenges Ørsted faces in this collaborative approach.

Virginia Dundas: We've been progressing extremely well on our collaboration in these initiatives, actually. It's been really, really good. Where it becomes a little bit difficult is in trying to get more and more companies to join. We want more companies to join forces with us. We don't want to be the only ones having this -- creating this demand signal to suppliers. We want virtually everyone in our industry and in other industries that make use of the same materials that we have in our supply chains to do the same because that is the way that we can achieve our long-term net zero targets.

But convincing and working to discussing and aligning with other companies, it's still something that takes a little bit of time. I would say I think sometimes it's happening fast enough, if you think about how needed and -- how valuable and how needed and how much the world needs this transformation.

Lindsey Hall: Another example of how Ørsted is working across silos actually involves our other podcast guest today, Walmart. Walmart, Ørsted and Schneider Electric recently announced that they've convened the first cohort of suppliers to take part in Walmart's Renewable Energy Accelerator, which is called Gigaton PPA. I asked Virginia about that.

Virginia Dundas: It speaks about the value of partnerships, the value of coming and getting together with others that share the same ambition but also share the same challenge, right? If you share the same ambition and you share the same challenge, you can get together to find a way of overcoming that challenge to deliver your ambition.

And the partnership agreement that we've done with Walmart is a great example of that. We're also working on other types of partnerships with other companies also to start closing the loops on supply chain and value chain decarbonization. For instance, we have a partnership with Salzgitter, which is a large steel manufacturer in Germany, with actually some memorandum of understanding where we're sort of looking at providing them with green energy and green hydrogen to decarbonize our production, and we will also be looking into sort of providing steel from decommissioned assets that they can use in their own production and in that way can take it into producing new offshore wind farms.

So they're very different. I think that we will be continuing to see a lot of more of these kind of partnerships where companies from different sectors get together to address a common ambition and also a common challenge that we have where we can help each other. In the case of Walmart, we can help them with providing renewable energy for their supply chain.

Lindsey Hall: Okay. Great. We've been talking a lot about challenges during this interview. And one big challenge, of course, is Europe's energy crisis. And we've also been talking on this podcast more broadly about how to balance concerns of energy security, energy affordability with longer-term decarbonization and energy transition goals. How is Europe's energy crisis going to impact Ørsted's sustainability and decarbonization goals and timelines, if at all?

Virginia Dundas: Yes. I think that is very -- it's, again, a topic that is everywhere, right? I mean we are under pressure here in Europe. We're under pressure in the world. And I think it's really, really important to think that sort of green energy and transforming to green energy is becoming even much more necessary because what is really good about green energy is that, if it's done right, it doesn't only help to solve the climate crisis, but it can also deliver jobs. It can help enhance biodiversity, local communities and it also can help create energy independency in the different countries where we are building the different assets. And that is a great thing.

When it comes to how the crisis is affecting our long-term decarbonization targets, what I can say is that is actually, at the time being, is not affecting them. We remain on track to decarbonize, fully decarbonize, our Scope 1 or 2 by 2025 and also on track towards 2040 with our target to fully decarbonize across all scopes 1, 2 and 3.

But what has also happened here in Denmark has been that we've been recently ordered by the Danish authority, in relation to the power plants that we have in Denmark, to continue to sort of [continue] the use of coal in one of the power plants that we have until 2024. And that means that our planned full phaseout of coal for 2023 is, of course, delayed because of the order that we received from the Danish government. And the reason the Danish authority has ordered us to do so is because of security of supply. We need to make sure that we can ensure the customers here that they can have access to energy. So in the short term, it delays our phaseout of coal, but it does not affect our 2025 target.

Lindsey Hall: So my discussion with Virginia continued and was full of great information that I am not able to fit into this one episode. One of the topics we talked about that we couldn't get to today was on nature and biodiversity. So we'll hear more from Virginia in our upcoming episode, previewing what to expect from COP15, the UN conference on biodiversity taking place in December in Montreal.

Esther Whieldon: And as a heads-up to our listeners, we'll take a break next week for the Thanksgiving holiday in the U.S. but we'll be back with a new COP15 preview episode on Friday, December 2.

Lindsey Hall: Thanks so much for listening to this episode of ESG Insider. And a special thanks to our producer, Kyle Cangialosi. Please be sure to subscribe to our podcast and sign up for our weekly newsletter, ESG Insider. See you next time.

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