Serge Younes: Invited to the Party

0:00So I often say that my job is to get yourself invited to the party. And the way that you do it is not by pushing an agenda. It's actually by asking better questions. There's a lot that you can learn from data, but there's a lot of things that you learn differently when you're walking the factory floor or visit the plant or sit with management, speak to operations team. You actually get to process how everything actually works. You actually learn things on the factory floor that you'll never learn from looking at a spreadsheet or sitting in a board meeting. You have to be there. So coming back to how do you engage?

0:42How do you get yourself invited to the room? If the management team sees that you're taking the time to understand their business, they're actually more likely to see you as a partner.

1:01Welcome to the Future in Sound podcast. I'm your host, Jen Wilson. This is a podcast where we discuss people, planet, and profit. In each episode, we'll learn from world-leading experts who can help us see the future we want and our role in it.

1:27This is episode 47. Invited to the party.

1:36Dr. Sal Jounis is Global Head of Sustainability at Invest Industrial, where he leads the firm's sustainability, responsible investment, impact, and sustainable value creation agenda across the entire investment lifecycle. He oversees ESG integration from due diligence through to portfolio management, working closely with investment teams and company management to drive operational improvements, risk management, and long-term value creation. His work also includes climate strategy, supply chain sustainability, governance, and stakeholder engagement across a global portfolio. Dr. Yunus brings 15 years or more experience in sustainability and responsible investment alongside a broader career spanning more than two decades in sustainability, strategy, and consulting.

2:25Prior to Invest Industrial, he was strategy director at Accenture Strategy, where he led global clean energy and low-carbon transformation initiatives, and previously was a director of sustainability services at WSP Environment and Energy. He holds a PhD in renewable energy and is a mechanical and environmental engineer by training. He's a published author and has worked extensively across Europe, Asia, the Americas, the Middle East, and Africa, supporting clients across multiple sectors, including financial services, industrials, infrastructure, and consumer industries. Alongside his role, Dr.

3:02Younis is active in shaping sustainability practices in private equity, including chairing the steering committee of Initiatives Climat International, yourselves will have to correct my French pronunciation, and contributing to industry bodies such as PRI, Invest Europe, and academic institutions. Dr. Sales Yunus, welcome to the Future in Sound podcast. Thank you, Jim. It's great to join you.

3:36Now, I've read the formal introduction to you. I don't know if there's anything else you wanted to share on your background and what really brought you to this role as Global Head of sustainability at Invest Industrial? Thanks, Jen. I think it's probably, I might repeat some of what you said in the bio, but I'll give it a bit of angle that kind of anchors the rest of our conversation. So as you said, I trained originally as a mechanical engineer, did a PhD in renewable energy and focused actually on climate science. So I actually came into sustainability from a very technical angle, energy systems, infrastructure, environmental performance, before I transitioned and moved into strategy and then into private equity.

4:18So, you know, as you mentioned, before joining Investindustrial, I spent a decade and a half in consulting, working with a diverse range of clients across industries and sustainability. So that consulting period was important because it exposed me to many different sectors and business models. It taught me that actually sustainability never looks exactly the same from one company to the other. the issues may have similar labels climate energy waterways supply chain governance etc but the business context it's regional whatever it's always different so that's probably one of the lessons that i've carried mostly with me into private equity and maybe makes me slightly different than how i view things so within the invest industrial i've been very very fortunate to have joined a private equity firm that actually believes in sustainability and they've had a program that is now 20 years.

5:15I joined eight years ago. And while my role, as you mentioned, integrated sustainability process investment life cycle, I bring a lot of that knowledge that I had in consulting, looking at different companies in automotive and oil and gas and food and retail and so on to bear into our portfolio. So having started 20 years ago, working with the large global businesses, the Unilevers, M &S, BMW, you name it, and bring that knowledge into small cap companies and help them on that journey, I think is incredible and very valuable for them. So I think about my role in very simple terms, you know, sustainability isn't a parallel universe, you know, it doesn't sit in a report or a side conversation or a framework that nobody uses.

6:05When you talk to somebody about GRI or SFDR, you've lost people already, right? So in a way, what I'm doing is connecting real operating priorities of businesses that are in our portfolio, your growth, cost, risk, people, innovation, your customers, all of those topics into something actionable. So that's the thing that I find the most exciting in my role in private equity is it became very practical. You're very close to ownership. You're close to the management. You're close to those decisions. And you're building a trust that makes sustainability relevant to those businesses that I'm working with in the portfolio.

6:45And going from theory to action very quickly. And because you're part of the ownership, you're accountable, right? In consulting, you've done your report. You work. You're 8 to 12 weeks. And you walked away and kind of, good luck. There is no good luck here. I'm here for 5, 10 years, right? I'm accountable for what I've done effectively. It's really interesting speaking to the point where sustainability looks a little bit different for every company. And it makes a lot of sense when you describe the importance of really understanding the true objectives and priorities for the company and matching sustainability to those priorities.

7:20My next question links to how you really get to know the company and build trust and influence. because to a lot of sustainability professionals, they might read, okay, there's this strategy or value creation plan, but it doesn't really come to life because they're covering a bunch of companies. They don't maybe know the companies that well. So I'm interested, how do you build trust and influence within your portfolio? For me, trust starts with humility. You really can't walk into a company and say, hey, I'm from sustainability and here's a gazillion things that I want you to do. that doesn't work and frankly it shouldn't and if you don't get thrown out of the room good luck for me you kind of have to earn the right to be in that room to be in that boardroom you know that company and the way that you earn that right is by showing that you understand the business you're here to help not to police that's that's a really important bit you know you're not you're not the cops you're you're here as part of getting them on the journey and helping them So I often say that my job is to get yourself invited to the party.

8:29And the way that you do it is not by pushing an agenda. It's actually by asking better questions. What keeps that CEO awake at night? Why are the costs increasing? What are the customers asking? What's new? Where are the regulations going? Why are they becoming so complex? Why is the company exposed operationally? And then try to help them to understand, Can sustainability be a source of differentiation, of growth, of strengthening our business? And actually, once the management team sees that you're trying to support their priorities, you're not adding noise, right? Then the conversation changes.

9:07You move from, use your reporting to, hey, they're here to help my company be stronger, right? So in a nutshell, you don't build influence by bringing a bigger list. You build influence by making that list relevant. It could be two bullet points. You and I spoke in the past about one of our portfolio companies in the US. And yeah, my shopping list would have been massive. But the one problem they had is staff turnover. We've been spending the last two years dealing with staff turnover. That's it. Nothing else matters. It's about business survival, making that business strong. Once that's done, then there goes the big list for the next three years, right?

9:51Right. So no, influence of private equity is about it's about building it through relevance. If you can translate sustainability into language of business, you're far more likely to be heard. You're talking their language. When it comes to actually building those sort of conduits and getting yourself invited to the party, etc. Can you take us through, it can be a fictional example or a real example. Like, how do you actually do that in practice? You've just acquired a company. What does that look like? What conversations are you setting up? And how do you go about it? It's actually a fun anecdote.

10:27So I or my team tend to attend most management meetings. We're participating in due diligence. We're there on site during that kind of pre-investment period. And actually 99 % of the time, we actually don't announce who we are. They might think we're part of the consulting team or so the advisors that are there. And when you come back after you sign and you're closed, they go, hey, I've seen you before. Yeah, I've been here. Like, I know what is going on in your business. And therefore, we can have a conversation about what's happening. I've been studying you for six months now. Right. I don't know everything about you, but I've got enough to have a real meaningful conversation.

11:16You know, I'm on the investment committee. I've actually read every single report, legal due diligence, commercial due diligence, you name it. I know what's happening in your business, and I know the plan, and I know how difficult that plan will be. And I'm here to be part of helping you to get to that plan. So again, it's what I said earlier, is you're talking the business language, you're understanding where they're coming from, and you bring your credibility. For me, it's giving examples. You know, if you're in the food business, I'm telling them what I did in consulting and what I did with the three other portfolio companies and how we want this client and, you know, how we streamline supply chains and how much we save on energy.

11:57And I tell them all of this. I say, are you ready? Let's do this. Let's get on the journey. You know, I remember another U.S. portfolio company. We went to present to them the plan. and we were you know was my team and i were giving them you know the spiel but in a business context and i remember the cfo raised his hand and in my heart was like oh god no like there the fight now starts you know i've been talking for an hour i've presented the plan that we had in mind competitive analysis things that are working things that are not working i got into the nitty gritty of what's going on. I was like, this guy's going to shoot, right?

12:39I could feel the room. Actually, I felt the room wrong because he said, so you say we need to do this in three to five years. Actually, we need to do this by end of the year. How can we do this? I was on the floor. I was like, whoa. Absolutely. And it would be one of these moments where, because usually there's this, especially with the CFO's office, how can we afford this? Is this really going to have a return. Oh, it's sustainability, therefore it's got to come at a cost. And it sounds like you're using business language so that it really resonated examples to show that it could work. I think that's really powerful.

13:18And Selj, before we started recording, you mentioned that you travel quite a lot, right? You're on the road. One of the things that I've noticed that's different when I chat to you versus maybe some of your peers is you spend a lot of time on the ground with companies on site, you're not calling in. Can you share a little bit about your philosophy there? And if there's anything specific you do when you go to site and what you're looking for and how that helps you be effective in your role? Yeah, absolutely, Jen. I mean, look, I live in my suitcase, but I absolutely love it. As you said, I spend a lot of time with the portfolio companies.

13:57And my view is that sustainability is very hard to understand from a spreadsheet alone. There's a lot that you can learn from data, but there's a lot of things that you learn differently when you're walking the factory floor or visit the plant or sit with management, speak to operations team. You actually get to process how everything actually works. You actually learn things on the factory floor that you'll never learn from looking at a spreadsheet or sitting in a board meeting. You have to be there. When you're walking around, you notice how energy is used. You notice water intensity. Where is the waste coming from?

14:35Scrap. You notice if the team has a good operational discipline, you notice is safety part of the culture or is it just a dashboard somewhere? You also notice if people are innovating, maybe they're doing really cool stuff, but they're not calling it sustainability because it never came to their mind that it actually might be sustainability and you get the culture, right? I make a point. I go and eat at the factory canteens. I get to feel people. Actually, I don't walk in a suit and a tie. You'll see me on a factory floor in jeans and my trainers and a shirt. And actually, people get surprised.

15:15Whoa, was that part of the shareholders? I'm one of you guys, right? I go from being the private equity guy to the engineer, right? But you're also bringing that personal touch. So kind of for me, the planned tours are not industrial tourism, right? They're incredibly useful because they ground every single conversation you have after that. When I get a call from a COO that says we had an incident, for example, I'm just thinking the worst case scenario. You know exactly visually where it happens. You know why it happened. You've been there. You walk that floor and you can have the conversation.

15:53Is it by that red door on the right as you enter? Yeah, that looked to me, it was dangerous. Remember, we had that conversation last year about it. We should do something better to avoid having another accident, or whatever it is, right? So sustainability tends to be very abstract. Talk about climate, biodiversity, human rights, regulation. It's actually important that it becomes practical. When you're standing there on the factory lines and production lines, you have a conversation. hey, where's the heat loss? Why is there so much material being wasted? You know, what happens to all this off-spec products that you threw away?

16:33By the way, how often does the line stop? Or have you had customer audits? All of those conversations become practical. You know, they're not up in the clouds. So also when you're having this conversation, that's when the best conversations on interventions come from. You're walking the line and you go, hey, why if we don't do it that way or that scrap material? Can somebody go there and spend those three pieces and maybe we can reuse it? You start to have that thinking and they go, oh yeah, we never really thought about that or that might be expensive. But actually, you're right. That's true.

17:10We spoke about it five years ago. Let's revisit it. Maybe the economics changed. So you go from maybe imposing some framework, You know, the invest industrial way to actually understanding the real industrial reality of those guys and being credible in helping. Right. So coming back to how do you engage? How do you get yourself invited to the room? If the management team sees that you're taking the time to understand their business, they're actually more likely to see you as a partner.

17:46Hey, it's Jen. I just wanted to take a quick moment to tell you about RICO and what we do. We work with private market investors and their portfolio companies to unlock real value through sustainability. That might mean identifying where sustainability improvements can drive measurable returns, helping you set the right targets, or making sure sustainability sits at the heart of your value creation strategy. We also work on some of the more complex challenges our clients are navigating right now, including how to approach AI responsibly as it becomes part of how we all operate. Ultimately, we help you do sustainability in a way that actually matters for your business and your investors.

18:25If that sounds interesting, come find us at re.co.com. All right, back to the conversation. It's really interesting because I'm there with you on the plant floor as you're discussing the red door and that kind of, And I can remember in my previous role working with manufacturing companies and the plants that I remember doing the plant tours and the plants where things were organized, the tools were kept in the right place. You could tell that there was a sort of methodical approach to clean up every day, like those kinds of things. They had the best safety and they had the lowest waste. And you see it again and again.

19:07And it has to do with businesses are groups of people who make decisions. and how effectively they make those decisions efficiently and how they learn if the decisions aren't working. It works on every front of the business, but definitely on ops. And you can see that in a very short period of time walking around a plant floor. It's all about culture and sometimes having the right leadership to bring that culture. It's incredible how I've seen it multiple times. You bring in a new chief operating officer who's on top of their game And in a month, it's a different business. It's incredible to see.

19:44That's amazing. And now I'm going to get, you know, talking about being practical. Let's move into maybe a bit more of the abstract and high level. We have talked about how the sustainability vantage point is different than potentially others in organizations. So how is time horizon for sustainability professionals different? And does that provide us with a differentiated point of view in a business? Yes. I think one of the most distinctive things about a sustainability professional, and I don't think everybody does it right, is we're kind of often looking around a corner. We're out there. If you look at businesses, most of the management is looking at the next quarter, the next budget cycle, customer issue, next integration milestone, whatever is necessary.

20:32And that's very important for a business. But actually, sustainability asks kind of different questions. What could affect this business in 5, 10 years or 20 years? It could be climate. It could be resource scarcity, regulation, change customer expectations, access to talent, you name it, nature by diversity, social license to operate. But the trick here is the role shouldn't be theoretical or alarmist. And I know some of my peers tend to fall into this trap. The role is actually bringing long-term lens into today's decision, right? We are there to look at risks and opportunities that are not yet visible in the financials, but will be.

21:16So, for example, if a company is making a CapEx decision today, it might be considering future energy prices or future carbon prices or future requirements, etc. If a company is building a supply chain strategy, it should be thinking about resilience and traceability. If a company is looking at new products, is it thinking where the market is moving or the regulation is moving for that product? So you need somebody in there that has that long-term perspective and could be incredibly valuable. But as I said, it's not yet visible in your financials. Now, in private equity, we're lucky because we have that slightly longer term horizon.

21:55But we're also defined by the ownership periods, which is a typical fund, then plus two, 12 years. The question that we often should think is, what do I need to build now so that the company is more resilient, more competitive, and more valuable in the future for the next buyer, but also for the buyer after that? So you shouldn't be thinking, like maybe many of our colleagues in PE, about the current holding period. What am I doing now? I need to sell this in five years or whatever. Actually, what is going to make this business interesting for the next buyer, for them to see value when they settle to the following buyer?

22:39So you're thinking three holding periods. Yours, the next one, and the one afterwards. It's so interesting that you say that. I know that, you know, we've got a couple more questions to go through in limited time, but I've just got to say as a Canadian, there's this indigenous principle, which is the seven generation principle, thinking multiple generations, different communities have different views. Some say, you know, it's seven generations into the future. How do I make decisions today that are going to make seven generations into the future better off? Others say I'm in the middle. How do I honor the past three generations and, you know, the future three?

23:15but I hadn't really connected the dots between generations in private equity, but it's almost thinking multiple investment cycles, multiple investment generations in advance in a way that no one else is necessarily going to be doing. No, I mean, look, it came to me through one of our investors many years ago. I think I was probably one year into my role and it's one of the religious groups. They asked me, sales, this company that you guys have golds, what's going to happen to it in 100 years? I just kind of stopped there. I look at them. They're like, are they mad? I don't know. I'm not alive in 100 years.

23:57Very false. Those guys are thinking millennials. And then it came to me and I was like, hold on. Insurance companies are looking a century ahead. All our investors, endowments, except everybody thinking centuries. And we're looking at the next quarter. Right? And, you know, we also had another conversation a few years back with actually our founder. And in passing, he's like, yeah, we've seen that factory already once or twice in the past. And we've been a private equity firm for over 30 years. So for us to see one factory, not once, but twice and three times in 30 years and different guises, those things are going to stay around for decades and centuries.

24:45It's incredible. And when we think about sort of zooming out with this longer term perspective and looking to the future, I mean, ESG was sort of huge in 2021, and then it changed, and then we've had backlash and a variety of different things. We're focusing more on embedding in business these days. what does sustainability in PE look like if we even zoom out to, say, 2035? I mean, impossible to answer the question, but any ideas would be welcome. If you had asked me that question at the beginning of my career, I would have given you exactly the same answer, which is I actually don't think that the role should stay siloed.

25:26I think it should become much more integrated, and actually it's becoming a much more commercial conversation, I think. if I look back 20 years in my career, some of this started in foundations, some of this started in communication, CSR, and it's evolved into a more technical space. And I'm not going to say we're about to move into the commercial, because that's already happened in large corporates. But I think private equity is starting to catch on that this is actually a deep commercial conversation about where our portfolios are looking like and how we're generating value. I think today, sustainability teams manage topics, regulation, porting, climate, supply chain, whatever it is, right?

26:13I think in 2035, a lot of those topics will be much more embedded into the investment, the operations and finance teams and less needing the head of sustainability type pro, right? As well, I think the role may become less about persuading people that sustainability matters and more about helping the firms make better decisions using the data and having this long-term view. Now, I say that. I've been in the business of change management for 20 years now. So it's not at one point in my career have I convinced somebody by just saying, hi, I'm doing sustainability. There's always been this long conversation about why it's important, why it needs to happen.