The Boeing Company (NYSE:BA) Jefferies Virtual A&D ESG Summit June 14, 2022 1:00 PM ET
Company Participants
Chris Raymond – Chief Sustainability Officer
Conference Call Participants
Sheila Kahyaoglu – Jefferies
Sheila Kahyaoglu
Good afternoon, everyone. This is Sheila Kahyaoglu with the Jefferies aerospace, defense and airlines equity research team. Thank you for joining our inaugural ESG Summit. We’ve had a great lineup here today, and we have Chris Raymond here at Boeing, who’s the Chief Sustainability Officer.
Chris, thank you so much for joining us. A little bit about you to start. You’re a Senior Vice President of Global Enterprise Sustainability and a member of the Executive Counsel at Boeing. You previously served as VP of Sustainability, Strategy and Corporate Development for Boeing, where you were responsible to engage and form and seek feedback from stakeholders following the MAX incidents. Chris started his career as an engineer at Boeing and eventually taking roles as VP of Embraer Integration, VP and GM of Autonomous Systems and VP of Global Business Development and Strategy for Defense, Space & Security, among others. I mean, Chris your resume speaks volumes, so I’m not going to read the whole thing, but I want to get right to Q&A.
Question-and-Answer Session
Q – Sheila Kahyaoglu
Maybe just to start high level — thank you again for being here. How does Boeing think about ESG and what goals have you set?
Chris Raymond
Yes. Thank you, Sheila, and thanks for even having us and including us in your conference today. We have a value at Boeing that’s around earnings, stakeholder trust and preference. And I could go and do a lot of things about ESG or sustainability, but that, after 36 years in this business, is the one that really motivates me about sustainability.
I actually think this topic is woven through every stakeholder of our company, and it is about earning their trust or their preference. And so we have set a lot of goals. We’ve got 6 of them, I’ll mention maybe a bit later. But I just wanted to start by saying the way I think we think of sustainability is we didn’t just get going on ESG. We’ve been doing some of these things since we became a company, but we did have to pull it together and put more focus on it and sort of organize it and speak in the language of the world was receiving sustainability now, which is really around ESG. And so that’s how we kind of created my position. But what motivates us about the job is earning stakeholder trust and preference.
Sheila Kahyaoglu
That’s great. You have the commercial airplanes business, the service business and a defense portfolio, which is the one probably people think about most when they — at least when they think about ESG? Can you give us a rundown of how you think about the role of ESG across each of the segments?
Chris Raymond
Yes. I think, first of all, I think it’s meaningful to any of our stakeholders, regardless of whether that’s our services business, our defense and security business or our commercial business. But it’s pretty clear that in commercial aviation, the whole industry has rallied around this ambition about net zero by 2050, IATA, all came to that conclusion a year or so ago. So in that business, there’s sort of an agreement around the ambition.
In the defense business, it’s not quite that aligned yet. But where I come out on the defense business is if governments are declaring net zero ambitions, then their ministries of defense are certainly going to be concerned about that as well. And they always have been about things like fuel security or energy security and fuel efficiency.
And then on the services business, the services business is all about helping people have more efficient operations. And in the aerospace business, you could have drawn a line between fuel efficiency improvements over the years. And so I think it’s just a thread that runs through all 3 of our businesses, and that’s one of the reasons we put it at the enterprise level.
Sheila Kahyaoglu
Can you talk about some of the work you’ve been doing for the government — as government customer from an environmental perspective?
Chris Raymond
Yes. Sure. I think for the government customer, it’s really around things like sustainable aviation fuel. I go back to the 2009 time frame when I think the U.S. Navy first flew in F/A- 18 Super Hornet on biofuel, we studied the C-17 and what would need to be modified.
So I think the DoD has always been a bit of a leader on kind of thinking about this concept of sustainable fuels. And with them, I think it gets back to fuel efficiency and energy security. Fuel efficiency is good. Obviously, we don’t want them to have to move as much fuel around, particularly if the airplanes are in conflicted parts of the world. That’s our security risk for them and the people that service those airbases.
And so fuel efficiency has always been important to them. But I think increasingly, it’s around this idea of operational energy efficiency or operational energy security for the DoD. And I think that’s where a lot of our digital tools come into play. I really applaud the Air Force and some of the things they’re doing on the C-17, for example, to help with fuel efficiency, more efficient routing, things like that.
Sheila Kahyaoglu
Yes. I just saw the press release come across as you guys prepare for your show. And how important is ESG in the day-to-day decision-making of the organization? Do you think ESG is being viewed more central to the operations of the business and your customers?
Chris Raymond
Yes, I do. I mean, I think I’m an example of that. I think in the middle of the pandemic, the fact that we created the role of Chief Sustainability Officer and put it at the executive level reporting to Dave, I think that is an example of how central it is to our business. And it goes beyond that, we’ve refined our values to explicitly include it. We refined our corporate strategy to explicitly include it. We’ve included it in our annual incentive compensation. It’s embedded in all of our businesses now.
And I think as we go forward, this topic of sustainability is intersecting any function of a company. And it’s causing what sustainability and HR mean? What the sustainability and finance mean? What the sustainability and engineering and product design going to mean going forward? So I think this is a topic that’s just going to intersect every function of a company and drive a bit of change as we move forward over the next decade.
Sheila Kahyaoglu
So we’ve seen oil prices go up a little bit. How has that changed or accelerated next-gen aircraft potentially?
Chris Raymond
Yes, that’s a great question, Sheila. I think when we think about how does aviation decarbonize? We’ve kind of got this four-strategy approach, which is really fleet renewal, investing in more fuel-efficient airplanes, the operational efficiency that our customers drive every day.
And then we get to the last 2, which are really renewable energy and how renewable energy is intersecting platform design. And that’s where a lot of the coverage is today. But our airline customers deserve a ton of credit. Even during a pandemic, they’ve all focused on renewing their fleets, improving the fuel efficiency of the fleets. And when we improve fuel efficiency, we improve carbon emissions.
So I think it’s a hugely important part of the whole fleet renewal journey that our customers go on. And those are long-term decisions, but I think you could just look at — you can look at the orders announcements over the last couple of years. And I think you would always see a carbon emission reduction message in there when it comes to renewing fleets.
And so I think they deserve a lot of credit for both fleet renewal and operational efficiency gains that they’re finding every day even during a pandemic and the challenging time they’ve been in the last…
Sheila Kahyaoglu
I’m waiting for it, but your 2022 sustainability report isn’t out yet. So maybe if you could give us some sneak peaks and highlights from last year’s report given it was your first one?
Chris Raymond
Yes. Sure. We — I think on sustainability reports, they have gotten lengthy. I think that’s because all of us try to do so many things with those reports. We try to speak to so many different audiences and so many people’s different desires.
The first probably one of the most motivating things to me was you want your own employees to be proud of the story of the company. I think it’s always been important to me that if a Boeing person took the time to read it cover to cover, they’d be proud of the company that they work for. And it would help tell the story of what the company does. And I think that’s important for our current employees to be good ambassadors for the company.
And I think it’s important for the next generation of talent that we want to know what kind of company you’re considering going to work for. So that’s kind of the first purpose of the company and maybe one of the most motivating to me, but we decided to organize our report around people, products and services, our operations and our communities. And then we picked 6 areas that we thought were particularly important to our stakeholders.
And those were really around employee safety and well-being, global aviation safety, diversity, equity and inclusion, our community engagement, our sustainable operations and then innovation in clean tech. So we highlighted those 6 areas in our first report, and we’re going to continue to put more voice and more sort of objective criteria around those in our next report.
And then I think you will also see us put a lot more emphasis on some of the changes we’ve made in safety with Mike Delaney’s office and our Chief Aerospace Safety Office that we’ve established.
Sheila Kahyaoglu
I want to talk more about environmental. Your 2025 goals, you’ve set 2025 goals around emissions, energy, water consumption and waste. Can you talk about those individually and help us understand where you guys are today?
Chris Raymond
Yes, we baseline those. I have to — you always stand on the shoulders of people that came before. Sometimes they were on these topics when they weren’t popular yet. And we have a team like that at Boeing that really set some of these goals. Back in 2017, we started measuring some of these things.
And that’s what we call our baseline year, 2017. And then over time, we established some goals moving to 2025, which we’re now extrapolating out to 2030. And those are around all the subjects you just mentioned. But I would say that if we looked at our 2020 data, it looked pretty good in terms of all the reductions to the baseline. We were sort of exceeding actually our goals. But I think we have to face that realistically. That’s because all of our economic activity was reduced. Production rates were down.
And so the number is pretty good, but we’re not taking too much focus in that. I think we know we’re going to return to a normal level of activity, and we need to stay on that trajectory for 2025. And I’ll just kind of take one of them for you. We talk a lot about energy because energy translates to carbon emissions. And so we are particularly focused on greenhouse gas reduction and therefore, focused on energy efficiency. That chose to kind of make part of our incentive compensation calculation. So we now have a part of our incentive comp is tied to 5 operational goals: employee safety, aviation safety, quality, diversity, equity and inclusion and climate goal. And the climate goal is really around energy efficiency.
We thought that was a topic that every employee in Boeing can do a little or a lot about. So we want to incentivize everybody to behave in a way that’s more energy efficient. So that’s why we made that part of our climate coal.
Sheila Kahyaoglu
This is somewhat related to that, but you reach net zero at your manufacturing work sites and business travel in 2020, obviously, a low level here. And that was through carbon offsets. What areas of opportunity have you identified in pursuing your longer-term environmental goals? And how does Boeing think about the purchase of carbon offsets in the longer term?
Chris Raymond
Yes, I’ll take the first part of that. I think, fortunately, we’ve got a group of people that really focus on conservation behaviors. We run a competition every year called Battle of the Buildings, and you literally try to generate ideas and get people to commit to take actions that will reduce energy efficiency.
And it’s all aimed at sort of introducing this side data that every person can do at least a little bit in terms of changing behavior and conserving resources, energy being one of them. We just completed that, and I think we had something over 250,000 actions across Boeing in terms of people and sight signing up for things. The conservation is first and foremost. You’d rather just not use the energy if you don’t have to. But then second, we have been increasing the use of renewable electricity everywhere we can. I think we have about 9 sites now that are 100% supplied by renewable electricity. We can’t find it everywhere yet. But where we can, we got a team that is scouring all Boeing’s major sites. And has our — all of our sites [parroted] by energy use, and we’re going after an increasing amount of renewable electricity wherever we can find it. And then longer term, we’ve got to help catalyze the renewable natural gas. That will be a longer-term area that we’ll have to focus on. But right now, it’s really this electricity area. And then you did mention carbon offsets. We did start to buy those in 2020, and we did it for a couple of reasons. One of them was to be able to say you’re net zero on your Scope 1 and Scope 2 carbon emissions. And we also included the business of all the employees of Boeing in the net zero as well.
But the other reason to do it was our industry in aviation is at least aligned around our system. It may not be perfect. But through ICAO, we have the CORSIA system, which lays out a framework. Or if we’re going to use offsets, then there’s a certain standard you want to buy them to. And so we went out and we needed to learn how to do that. We needed to learn what verified offsets were. We needed to learn how to buy them. We partnered up with the CBL Exchange, and we went and bought those in 2020. Because if our airline customers are going to need to use exchanges like that and use the CORSIA program, we felt like our company should also know how to do that. And to me, that was almost more important than just being able to say, “We’re net zero.” That’s very important in and of its own, but I think it’s more important that we’re participating in the same system that our customers…
Sheila Kahyaoglu
And then the ecoDemonstrator is a big part of leading your sustainability efforts. Can you talk a little bit about that program? And how you set up those partnerships and testing the strategy there?
Chris Raymond
Yes. I mean I have to give a lot of credit to people like Mike Sinnett from our product development team in Boeing and his team. I think we’re having our 10-year anniversary this year on the ecoDemonstrator program. So this wasn’t something Boeing just started yesterday. This has been a long time program we’ve invested in and committed to and really focused on I think now over about 200 technologies. And they don’t all make it to an airplane. In fact, you wouldn’t want them all to.
You try things. You see what’s going to work. You see what’s worth doing or what’s worth maturing and putting on an airplane. Actually Winglets, which we all sort of take for granted and see on just about every commercial airplane now, those came out of an ecoDemonstrator program long ago.
And so we look to pick an airplane, and then pick partners and projects that will improve efficiency or safety or noise or weight, things like that. And that’s been a very effective program, and then we’ll partner with airlines — our most recent partner was Alaska last year with the MAX 9 airplane.
And then we’ll partner with organizations who have projects, maybe their suppliers, maybe their governments or academia. We want to put a project on the airplane and get experience really flying that thing like a low-profile light or a new antenna or some recycled material for cargo bins, things like that. And that’s what that program really does. It helps assemble and integrate partners who are trying to innovate, collaborate and accelerate more sustainable technologies.
Sheila Kahyaoglu
now, that’s great and super interesting about — I didn’t realize there were 200 efforts under ecoDemonstrator. So moving on to SAF, you’ve set a goal to be capable of flying 100% SAF by 2030. Now I have a lot of questions for that. That’s alongside partnerships with the likes of Sky’s NRG and EPIC Fuels. Can you talk about the testing you’re doing today with SAF? What are the blends — at what stage are we in terms of adoption there?
Chris Raymond
Yes. So on SAF, I think Boeing has put a lot of our emphasis on sustainable aviation fuels. We like to think we’ve been a part of that since they first started being talked about and qualified back in 2006, 2007. And I think we flew the first airplane on SAF in around 2008. And then in 2018, FedEx, as part of an ecoDemonstrator program, actually flew 100% SAF. And so we do think SAF is a critical part to getting to net zero for aviation by 2050. No matter what happens with other energy carriers like electric or hydrogen, the industry is going to need a lot of sustainable aviation fuel.
So we kind of call that SAF hand. We’re going to need SAF hand whatever else we can bring to bear. But we’re going to need a lot of SAF. And I think a lot of independent studies have shown that for aviation.
So our thought was, regardless of how much sustainable fuel exists by 2030, we need to understand what might have to change on an airplane, a fuel system, the engine, maintenance procedures, If 100% sustainable fuel is available today and we needed to fly on it every day. We should do that work. That’s up to Boeing and the engine manufacturers to do that work.
We’re also a fuel user were small compared to an airline, but we do use fuel. And we should start to make more of that fuel use sustainable. And so that’s what the purchase with EPIC was all about. And that’s actually also what our partnership with SkyNRG is all about. And we can be a fuel offtaker as well.
But then I think the third one is the harder one, which is what else can Boeing do to help catalyze this industry to grow? And we want to put our voice on those things, our partnerships on those things. And a lot of that will have to do with advocating for policies that help incentivize capital flow, to help incentivize the industrialization of sustainable aviation fuel.
And then I think my last point, Sheila, would just be, there’s going to be a lot of innovation in sustainable aviation fuel. There’s the ways that we know how to make it today. And I think there’s about 9 different approved qualified pathways for making it. They’re typically limited to about 50-50 blends of sustainable fuels with jet fuels.
But as we go forward, we’re going to see a lot of innovation in the feedstocks, the processes you can use to make the fuel, how carbon capture can help make fuels even cleaner. I just think there’s a spectrum of sustainable aviation fuels over the next couple of decades. I think it’s going to be a really innovative space, and we’re trying to participate with players that are looking at these different ways to make sustainable fuel going forward and see if we can help catalyze that faster.
Sheila Kahyaoglu
And how do you think about Boeing’s role in the broader industry to push this — to use SAF? Would it be through engine technology? You talked to a little bit about it of course right now, but what are the conversations you’re having with suppliers? What could they help bring to the table? And what are the other significant investments needed in the supply chain? Again, you mentioned that, too. There’s 9 different ways. So how could we maybe make one of the most reasonable layer? How does that all pan out?
Chris Raymond
Yes, it is. I think that you start to see a lot of more conversations about how to scale this up. If you look around the world, you see emergent policy. In some cases, it’s mandates on the amount of use of sustainable aviation fuel. In other cases, it’s incentives, maybe back-end incentives like blender’s tax credit here in the United States that’s before the Congress and tied to the White House’s Sustainable Aviation Fuel Grand Challenge.
Investment tax credits is another way on the front end of a project that we started to see people talk about. And I think all that helps derisk the capital because these are not trivial capital expenditures. And typically, if you were to start a greenfield site, you’ve got to invest in building a facility to make the SAF, and that could take 5 to 6 years before the fuel starts coming out the other end of the factory. And then the other way to do that is to take existing infrastructure and modify it to make SAF.
And so I think all those pathways are going to be good, but they do take capital investment. And the capital investment wants to be derisked by proper policies and signals of demand. And that sounds a bit complicated, but I think the current environment is bringing those players together in a more accelerated way than maybe we’ve seen in the past decade.
Sheila Kahyaoglu
The airlines always have their wish list of things that they want. What are early signs you’re seeing in terms of demand signals for SAF-powered airplanes?
Chris Raymond
I think if you just were to kind of go pull up the headlines over the last couple of years, you’d see a lot of airlines that have committed to offtake. And so that’s one signal is the demand is signaling that if this was produced at — you have to always take into account the price as well. But if it’s produced and the price is reasonable compared to the cost of carbon that’s going to materialize around the world, then I think you see people sort of expressing the demand.
And I think one of the reasons for that, and we agree with this, as Boeing is, this is a solution that’s a bit drop in. For anything to take root in our business, it’s got to be technologically possible. It’s got to be safely certifiable or qualifiable. We have to deal with whatever infrastructure changes have to happen. We have to deal with the market and economic adoption.
If you look at sustainable fuels, one of the reasons the industry has rallied around these as we kind of are through 3 of those steps. We know it’s possible. We know how to qualify these fuels with ASTM. We know the infrastructure doesn’t have to change very much, if at all.
And how we’re at this sort of how do we scale this up and get it more market adopted and more economical, and that’s where we are at now with sustainable goal. So I think that’s why it’s such an exciting time for the industry because I think we all see this as something that can be dropped in a little more easily into the global system of aviation and help decarbonize faster.
Sheila Kahyaoglu
And then can you talk about green hydrogen? How does that fit into the picture with SAF?
Chris Raymond
I always say, and I think my colleagues in engineering — by the way, we have a dedicated chief engineer over future mobility and sustainability. And he and his team’s whole job is to think about electric aviation, hydrogenation aviation. We can talk some more about that. But I think we like to say the world should want more green hydrogen. Whether it gets applied or how it gets applied to aviation, the world should want more green hydrogen because that would mean that there is an abundance of renewable electricity.
And this is one thing I think whether we’re talking about electric or hydrogen as energy carriers, all of these things have life cycle emissions attached to them. Electricity in most places in the world has not made 100% renewable right now.
It takes a lot of electricity to make hydrogen, no matter which method you use to make hydrogen. So these fuels, while they hold promise, they also have a life cycle emissions associated with them. We have to understand when we’re evaluating them, thank goodness they can bring to airplanes and airplane emissions.
And so we’ve flown 5 different airplanes on hydrogen. We recently built a huge composite cryogenic tank for storing hydrogen. It’s about the size of a regional jet in terms of its diameter. The airplanes we’ve blown on hydrogen have been hydrogen fuel cell. They’ve been liquid combustion hydrogen. We’re in the space business every day. So we do understand how to apply hydrogen as a fuel. And there’s things that have to be solved.
So we just — while we’re working on electric and hydrogen, we just think if we’re serious about reducing the carbon footprint over the next couple of years, we need SAF and we need to be exploring those things. But no matter what, we need SAF. So that’s why we’re putting so much of our attention on how to help scale up that industry around the world.
Sheila Kahyaoglu
And then you’re also making investments in electric aviation with your venture with Wisk Aero. Can you talk about what’s on your agenda there and how you’re thinking about the future of electric aircraft?
Chris Raymond
Yes, that’s an exciting one. I think Wisk is exciting for its urban mobility potential. And this idea that as we go forward towards 2050, our cities are going to get more crowded? Our infrastructure is going to get more challenging. People are going to want to move around faster, on-demand intermodality and those things.
So it’s exciting potential for that alone. But what Wisk really is teaching us is how do you design and certify an all-electric airplane? The battery packs and the engines, the motors those didn’t exist. You couldn’t just go out and buy them. Those had to be designed, invented, power management system to be created. All that is an important learning and understanding where the limits of scaling that are and are not is also an important part of the learning. That’s autonomous. So being autonomous from the get-go is something else we wanted to learn how to certify. So working with it, we’re going to try to present an airplane that is autonomous and all electric and put that through the certification process. And I think we’ll learn a lot about that.
And then both what are the limits to all electric vehicles but where can we take some of those technologies and also scale them to bigger and bigger airplanes. And I think autonomy will have a path on that.
Sheila Kahyaoglu
Let’s switch gears to social a little bit. Can you give us highlights of the 2022 Global Equity Diversity Inclusion Report that was recently released?
Chris Raymond
Yes. I think on that, I really — our human resource team and our ethics team has released the second version of that. And I think it’s really about — as it always is about how do we attract more diverse talent, how do we retain it, how do we develop it. And I think if you look in there sort of looking at both onboarding that, how we add to our sort of our pipelines and our slates and make sure that we’re getting the diverse slates, but also looking at things like exit rates. And are we seeing certain types of people, females versus male, as an example?
I know that was a lot of the discussion coming out of the pandemic. But we want to look at exit rates to see what that can tell us about certain populations of people that are maybe exiting faster. We’re really proud of the data this year that we saw in that. We’re making gains.
In terms of our diversity, we’ve got a full-time ratio equity task force in place. That’s been a big part of that. And so we’re really proud of the work there, but it is work that you’re never done on. And so we just have to stay focused on that and a lot of our business resource groups that we have around the company for different ethnicities and everything, that’s another part of the voice that we get.
But I think just listening and then making sure that we’re being more intentional about the outreach, certain academic institutions and change the way we recruit a little bit as part of it, and actually making sure sustainability is featured in our talent recruiting is another important component of attracting people to the company.
Sheila Kahyaoglu
And as one of the largest direct and indirect employers in the U.S., how does Boeing think about sustainability and diversity across the supplier base? What’s the role of Boeing in the industry in your view?
Chris Raymond
I think if we looked at the numbers, I don’t have them all off the top of my head, but I think we’re pretty proud of what we do in terms of small and small disadvantaged businesses and some of the small suppliers we try to bring along.
I think we spent about $4.5 billion with those kind of suppliers in our system and probably between 300 and 500 of these kind of companies. So both on the government side and on the commercial side, I think we work with a lot of these companies and try to develop them and bring them along not because you have to, you’re constantly trying to develop a bigger ecosystem of supply and you’re trying to gain the innovation that comes from some of these smaller start-up businesses and then qualify them to be suppliers to somebody like Boeing.
So we’ve always been put on that work. I just think, during the pandemic, it might have taken on a renewed importance because we had to make sure we were communicating with our supply chain, in some cases, helping connect them to resources during the pandemic; in some cases, working to make sure their financial stability was there and that they’d be there when we climbed out of the pandemic.
We have a role to play in that. And I’m really proud of our supplier management team and all the work they’ve done to bring sustainability into their thinking and their councils. And I think just recently, we released a new supplier code of conduct. And a big part of that was driven by sustainability and also leveraging some of the national and global associations that exist around business ethics and responsible business practices.
And we’ve got a couple of individuals on our team that are very engaged in organizations like the International Aerospace & Environmental Group as one organization that is doing a lot of work. Boeing and Airbus are both involved in that. We’re doing a lot of work trying to make sure that how we have suppliers report emissions and things that are harmonized government and commercial, in particular.
So there’s a lot of room to run there, but there’s a lot of focus on it, too. And I think the small disadvantaged businesses are a big part of that.
Sheila Kahyaoglu
Just to elaborate on that a little bit. How do you think about culture setting at Boeing? In particular, the team seems very involved in community with volunteering investing and so forth. If you could talk about some of the initiatives there, perhaps?
Chris Raymond
Yes. I mean, there’s a lot of ways that shows up, I think, in the company culture. One thought I was having when you said that, Sheila, was early, we are really putting a lot of emphasis on this behavior called Seek, Speak & Listen.
We’re spending a lot of time teaching our leaders, taking it on as individual development challenges, but certainly in leadership positions, taking that on. And this idea of looking for issues, looking for areas of anxiety or uncomfortable topics,; seeking to pull people’s ideas out on that, really listening, that set elite behavior is something we’re putting a lot of intentional development focus on in. So that’s a big part of culture.
But where you, I think, were going was our Boeing global engagement activity is significant around the world. We orient that activity around what we call our homes, our heroes and our future.
Yesterday, you saw us make an announcement about veterans to add to the portfolio of activities, we focus veterans, transitioning veterans into the workforce. That’s all around our heroes. We do that globally. It’s not just with U.S. military men and women.
And then our homes are about all the community engagement activities that our employee base is interested in. And these are things that the company will match employees to. And I think we have an incredible program. We have an employee community fund that’s approaching 75 years old. I think it’s given over $1 billion since its existence.
So the people at Boeing are generous with their money, are generous with their time. And as you know, we live in a world where the needs are endless. And so I think we try to orient those things around our homes, our heroes and our future, and the future is a lot about STEM and education and diversity of who’s entering those pipelines.
Sheila Kahyaoglu
As to — I was originally asking more social, but switching gears to the governance aspect of ESG. And you alluded to it a little bit. Can you talk about what sort of steps Boeing has taken Boeing following the tragic accidents involving the MAX? What sort of protocols are now put in place since that time?
Chris Raymond
Yes. I mean, I think you saw recently, Mike Delaney released his first Chief Sustainability Officer report — sorry, Chief Safety Officer reporting. I think the standup of his organization and Mike, in particular, with his experience and background, the changes on our Board Safety Committee, those are all things that we’ve put in place, and we’re never done looking for ways to improve safety. But the engineering changes we’ve made, those committees investing in artificial intelligence and ways to look at safety data, the establishment of our safety management system and driving that further and further into the culture of the company, those are never ending journeys, but all things we’ve done as changes that we’ve made inside the company and — so that will all continue, but those are a few of them.
Sheila Kahyaoglu
And then you alluded to it just now, but you’ve made some progress with the new Board Safety and Oversight Committee, what sort of steps have they take? And what’s their involvement with the company?
Chris Raymond
Well, they’ve got — they establish criteria on Board members for safety and related experience on. And then they’re active every day in this process with Mike and his team and the safety — the Aviation Safety Committee itself meeting, the meetings that occur below that throughout the company with the business unit presidents on safety. There’s a whole infrastructure of activity under a safety managed system, external people that have been brought in and joined Mike’s team from airlines in many cases. So I think it’s been considered — considerable.
And then on the sustainability side, sort of the same. The Governance and Public Policy Committee was renamed. They were focused on sustainability before, but they wanted it to be even more explicit. So we renamed that Board Committee, and we renamed the Charter of that company. So that it’s even more explicitly focused on sustainability and safety.
Sheila Kahyaoglu
And then for employees, you put in place this new safety management system to create more transparency around the firm. Can you talk about the system, what it does and what it means for your employees and the culture of Boeing?
Chris Raymond
Yes. It’s a system where you’re really constantly receiving data and input. And to receive data and input, you need a culture where people want to speak up, and they realized that is what you want them to do and they’re not hesitant to do that, whether they’re in the supply base or they’re in your operational customer sets or in your own employee base.
And so a big part of the functioning of a safety management system is having that right Seek, Speak & Listen culture that we talked about earlier and making sure those things are coming to the surface and they can be worked on. And then it’s also about making sure that you’re promoting that culture actively, you’re educating people about that.
And then there’s actually an operational rhythm that exists with different committees that occur, and I mentioned our business unit leaders, they attend those weekly safety meetings where those things are coming up to them so that they can be dealt with, any help that’s needed to flow to that problem.
And it’s kind of a never-ending journey but one that Mike overseas implementing for the company with his Chief Aerospace Safety Officer role and the organization he’s built around that.
Sheila Kahyaoglu
And then for executives, you have an individual performance multiple related to ESG from feedback from the Aerospace Safety Committee. How does ESG tie into those discussions? And how do you think about performance — how do you measure performance against your goals?
Chris Raymond
Well, we — I mentioned that we added — the Board actually added climate. We call it the climate goal, but it’s really around energy efficiency. Because we know that energy efficiency translates to less carbon emissions.
So we have those operational goals tied to the incentive plan. They’re around employee safety, aviation safety, quality improving, but then the new ones were around diversity, equity and inclusion and the climate goal. And really, the way we measure that is looking at the energy use across our sites.
And then we have an absolute goal and we could have played with an intensity metric, but we thought to start, we should focus on absolute energy reduction that’s what will give us absolute carbon emissions reduction. That’s really what we’re after.
So we did add that dimension to our operational goals for incentive comp this year. And it’s — but it’s really around making sure that everybody at Boeing feels like they can do something for energy efficiency. It’s not just limited to a small group of people over here or over there. We can all do something. And we try to encourage that with things like Battle of the Buildings like I mentioned before.
Sheila Kahyaoglu
And then just to wrap up, maybe if you could give us one takeaway for each of the pieces of ESG that you want people to walk away with when it comes to Boeing?
Chris Raymond
Well, I think I’d just end where I started. I could go through each of those letters or I could go through each of our businesses. But at the end of the day, it all matters. And I think me, my takeaway would just be that this is — the sustainability report sort of tells the story of what the company is doing. It tries to speak to a lot of different audiences.
But I really want it to be something that the Boeing employees are proud of and that they can use and learn and help kind of the ambassadors of the company. And then you want anybody to pick it up and read it to sort of say, “Why, I didn’t know Boeing was doing all that.” And all of that is — goes to the earnings stakeholder trust and preference.
Come back to that because I think that’s what it’s all about. And I was kind of thought that you earn trust through transparency, you’re in preference through your performance, your innovation, whether you’re providing value to that stakeholder and the relationships that you have. I just view sustainability as being one of the things companies like ours need to do if you are trying to earn that particular trust and preference. So — that would be my takeaway. That’s what I consider to be the mission of our sustainability team is to help and earn stakeholder trust and preference.
Sheila Kahyaoglu
And that’s great. Thank you so much for all your insights. Chris, we really appreciate you spending the hour with us, and thank you, everybody, for joining.
Chris Raymond
Thanks, Sheila. Always good to be with you. Thank you for asking, and look forward to seeing you soon.
Sheila Kahyaoglu
Thank you, all.
Chris Raymond
Bye now.
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