Doing good is good for business with REI's Kate Wendt
Episode Details
Transcript
REI’s Kate Wendt shares how a pivotal decision to rethink the role of the office while maintaining employee engagement impacted REI’s commitment to their triple bottom line (people, place and planet). Plus, we learn the many ways that doing good is good for business.
Link to full episode transcription.
Produced by Larj Media.
Connect with Hayete on Linkedin.
Hayete Gallot
00:00
Welcome to pivotal. I am Hayete Gallot corporate vice president for commercial solution areas at Microsoft, I get to work with customers around the world to help them transform their business, through technology at the center of every transformation are people who give technology its purpose. They are the ones with spark Visionary ideas, for leveraging, technology, and have the drive to push them forward for their business while empowering others. We like to talk about technology. I know, I like to talk about Out technology, and we often forget the heroes behind technology and Transformations you we forget you and that's what I want to talk about through pivotal you're likely familiar with the idea of a triple bottom line, that idea that an organization's success is not just about its finances but also the company's social and environmental impacts today we are lucky enough to learn from a leader and an organization. That believes doing good. He's good for their bottom line and it's proven it for decades. This still in their transformation journey to do the most good for their members. The planet and the broader Community Kate Wendt is Vice President of strategy transformation and sustainability at REI The Coop that we all know that not only sells outdoor gear but also is the leading transformation company in retail and it's not too Surprising that Kate would end up at REI.
Kate Wendt
01:32
Here was born and raised in Seattle. Both, my parents were as well. And I think you know, as a wonderful place to grow up and really I think just in terms of a connection to Nature in the land, right? I mean it's all around you mountains you know Lake speeches and I think really instilled in me a type of mindfulness, you know, like you have to look really hard sometimes to find a little crab, under a rock or whatever that is. And obviously a lot of privilege also that came from growing up here, right? We have great schools. I was, you know, lucky to live. In a great area that had great access to education and a family connection and community that it provided with a lot of opportunities that if they want to acknowledge that as well.
Hayete Gallot
02:09
And locates is not a Microsoft employee. She's actually had a very interesting experience with the company. As a young person.
Kate Wendt
02:15
This was back when I was in the fourth grade. So in the early 90s, Microsoft hat was, you know, learning about obviously computer science and trying to understand what was possible from what an age could kids actually grasp the concepts in the basics of computer programming. So we were tasked with doing something fun with it and create our own video games, and they're going to be for lead programmers in the fourth grade class. And I was chosen to be one of them, and I was the only girl and it ended up being wildly successful. We did this great video game in my area called endangered animals. You know. This was also not very sophisticated think back in the day it was like Oregon Trail was the hot, you know, video game back then. So was pretty basic, but at least maybe a little More positive than like, oh, you have dysentery. Sorry, try again. So, that was the focus of it. Microsoft was great. They actually put her just, you know, like dis copies of all the games and package them for us. And we did like a drive to sell them to family and friends that kind of stuff and raise money. But we actually went and presented to Bill Gates and talked about what had we learned. You know, what were the challenges, how easy was it or not to actually develop some of those skills and it ended up being such an interesting experiment again relatively and being a young ages that we went to MIT as well. And so we're kind of proof point for how could kids learn to code and specifically also how good girls learn to code? And so proving that from really early on the punch line of the story is not that then I became a software engineer unfortunately. But you know, I think it really did lead me to question also, like, why was it considered so unusual that a girl would be a lead programmer? And would you know be a leader in math and science and those type of skills and ended up fast-forwarding. Forward to was fortunate enough to go to undergrad at Stanford and I wrote my honors thesis about occupational. Segregation in the gender wage Gap. Meaning why is it that the gender wage Gap exists? You know if you look at it from an economic standpoint and a lot of it actually being explained not by women earning less than men for the same job, but that they were segregated to only certain occupations. And so that actually is really part of what inspired me to go into Career & Finance. That Was, I Thinkin stilled by An early sort of drive or wanted to see what was possible for women and wanting to really make a dent a breaking into some of these sectors that really still had not been broken through as you think about, traditional careers for women and men, even at the time, you know, in the early 2000s from a young age, Kate was keenly aware of the inequities around her yet.
Hayete Gallot
04:51
She was willing to put herself out there to try and make change. And if you think about Wall Street in the 90s, it was pretty much a boys club.
Kate Wendt
05:00
Really my goal again. It had been like, hey I am going to break through it, set a goal to be one of the youngest, you know, female senior analysts on Wall Street. So I did equity research covering retail and consumer and then later Healthy Lifestyles and grocery companies. And I made, it was 29 had my own coverage on Wall Street. And unfortunately kind of had this moment of being like, I worked really hard for a decade to do this and like is this it is this really what I want and I had a hard time reconciling I think you know obviously the short-term nature ER, of the street. And I think just not appreciating particularly types of companies that were prioritized a broader set of stakeholders. So now we're hearing a lot about that, right? In terms of hey, it's not just about shareholder profits, but really, you know, was inspired by, you know, this time was premiums on Whole Foods and things that they were doing particularly with their suppliers and then equipping their customers really, to be able to make different choices and have a different impact. And I knew from that moment that I wanted to only really be Really intentional about what type of organization I would choose. That was really in it purpose-based to a score and that was a pretty short list. So it led me to REI pretty early on for people who don't know. REI, we are not just a private company but actually a member owned Cooperative. So the largest consumer Cooperative in the u.s. We have about 22 million lifetime members across the country, and we are actually two celebrating our 84th anniversary today.
Hayete Gallot
06:26
Once again, Kate took action to find a place where she could use your skills and her voice to create change. She says, that the fact that REI is a co-op owned by its members, really makes the organization run in a unique manner. Not only are they free from the influence of traditional shareholders, but because you're a big organization, they actually have the resources to go after their goals and their members goals on a much larger scale than what the traditional retailers do.
Kate Wendt
06:58
It really enables. Some provides the permission to do much longer-term, thinking and investment, right? And also to challenge ourselves, hold ourselves to a higher standard of how we would measure success. Kind of goes back, to why we exist as an organization. So, you know, our fundamental belief is that time outside is fundamental to a life well-lived well great. Then why do we exist? You know, against that belief? It's really around aspiring and enabling life outside for everyone, you know, thinking about an inclusive lens. Well, well, how do we actually translate that into action, you know what's our mission, and it's really around connecting. Every person, ^ the outdoors, and equipping them in the fight to protect it. And I use those words pretty intentionally and having an edge around it. I think that, that also relates to then, what, how do we measure success? A lot of people talk about double bottom line. We actually consider that, we have a quadruple bottom line. So, we gauge our success relative to key metrics. We have around our employees. First, and foremost, our members which are really our shareholders Right. As well as are many of our employees that our members are business and then broader societal impacts. So you know, we're going to make different types of decisions and really need to be intentional about where we're trying to go as an organization and making different types of Investments than you. Maybe would be able to if you're you know just thinking about the next quarter or as a publicly traded company but there's also a lot of obligations and Duty that comes with that, right? We also feel like we need to store this organization that's been around for nearly 100 years for another hundred years as an outdoor retailer.
Hayete Gallot
08:34
REI is a unique conundrum. How do they manufacture and sell great products that will connect with people and the outdoors without allowing the manufacturing process to contribute to climate change? It's a really difficult question and it's not one that they're shying away from. In fact, the way REI is approaching sustainability is having a ripple effect up and down the retail chain. REI is holding themselves to high standard is on sustainability, but similar to Microsoft. They're also demanding the same from their suppliers, and they're educating and encouraging their members so that they can do the same.
Kate Wendt
09:13
Some of that tension is actually inherent in really what's our, you know, our vision. Our, you know, we do use the term, be Hague big, hairy audacious goal from Jim Collins, good to Great. Like what are we really trying to achieve? And there're multiple components of that. So we have laid out this Vision or be hag to become. To grow from being a 22 million member Community today, 250 million by the end of the decade, why right? I just talked about, we're not a public company like it's not about growth for growth's sake, it's about growth for impact. So our theory of change is if we could 2 or 3x the sides of Our member community and you think about those members of we're able to equip them to actually be able to make change towards our two great impact priorities and really existential threats which are climate change and racial Equity as it relates to systemic barriers Getting outside, we can create this ripple effect of change. You think about the power of those people in their communities? That actually tip the scales on those issues on a national basis. Certainly and maybe even on a global basis. So, we really think about what is our role as we think about climate to not just reduce the footprint of what we are. Manufacturing, I will get to that. Yes, we do need to do that. How do we actually equip our consumers, to be able to make better choices through our product impact, standards for things like circular Commerce? So, Our resupply business rentals, Etc. How do we really set the bar on sustainable materials? And so, how are we actually reducing the overall impact of what we provide and creating that ripple effect for consumers to make better choices in their overall lives? So that hard truth, I think around climate change to is like, we could do great work and make a really small dent in the overall fight for climate change, but if we can actually create that ripple effect to talked about through our members, through our employees and through all of our vendors, your Only is your North Face but also smaller vendors as well. That's how we're actually going to really mobilize change.
Hayete Gallot
11:06
Kate stays one of the things. REI is discovering is all the ways that getting real good data can help in the process. They want to understand things like how their members are using REI products, what they do with those products, when they're finished with it. And what qualities are most important when they're shopping for a replacement but it also wants to learn more about the manufacturing sign like how much energy, does it take to create a product? Where does that energy come from? And is this item created in a way that it can be recycled or reused and ascending? These things can help REI do even more to choose product that their members will love and have lower impact on the planet.
Kate Wendt
11:46
The other way we can think about it is actually through number one designing new products so that they can be reused re souls and actually have better end of life. In terms of being, you know, repaired or disassembled. I think a key piece of thinking about the overall Carbon life cycle of a product is how many times could it actually be used and reused by someone? So that you're getting the most use out of that product. And then at end of life, you're disposing of it in a responsible way, hopefully Recycling and actually fully you taken it out and becoming a new product versus in a landfill. So for us, you know we have actually been in the circular condom bursts business for over six decades. So we have had what we call our garage sales and our stores for members only for a long time. It's been kind of unique offering that we had of hey come and get amazing deals on great quality stuff. That's second hand. But it's largely been the source of that is largely been out of stuff that has been returned and then may have a small amount of Damages that we can't sell First Quality but it's definitely still has a lot of life out of it. What we're trying to really do to expand that market is say, well gosh, if we have 22 million lifetime members that have all this gear and apparel and other things that are sitting in their closets or in their garages, and they don't know what to do with, maybe they want to trade up to something else. Maybe they want to make sure that it goes into hands of another member, you know, that can use it to be able to get outside. We have just expanded the ability for all of our members to be able to trade in products at any retail store, as well as online. And that also opens up a great opportunity for those that are either new to the outdoors, the outside to activities to be able to get into those in a much more approachable, price point and still with a great quality offering and then it has all these great sustainability benefits as well because the carbon efficiency of something that is a new Addict versus something that is used is 50 to 90% of what it is of a new product. So we're really trying to create the market that already exists. How do we amplify it and grow that as a unique member benefit that we can offer? That has so many different co-benefits from a sustainability standpoint.
Hayete Gallot
13:46
Again, kids, creativity and willingness to put our ideas into action as really brought about big changes for REI. But even more, this work is having an impact on others up and down the supply chain.
Kate Wendt
13:59
If you think, Anybody really in the consumer retail space generally, as we talked about the largest source of your missions, is going to be in the supply chain so that manufacturing new product, particularly hard and Retail and apparel because there's a high level of fragmentation around your supplier base. So it's not like you work with a handful of suppliers and you know, it's this the same person from raw material all the way to finish production. It's very fragmented. And so, you know, we also have an issue of domestic versus International meaning for a large part of product. I am raw material to production happens over in Asia. You know, large amount in China, Vietnam, Indonesia, Philippines, Thailand, Etc, issue, being that a lot of the energy grid there is still off of fossil fuel. So what we really believe that we need to do is work with some other partners to prove out a model to transition the grid. That's powering those factories towards clean energy. One of the brutal choose around climate change is that those that actually contribute. The least two carbon emissions, globally are those And they have to face the biggest brunt of the impacts of climate change and largely in the same countries that I just referenced. So there are fortunately, some models that have already been. It's been proven of things called a power purchase agreement or virtual power purchase agreement. So we have actually seen companies like Ikea or Walmart just in the past year to suit some really interesting work in this space. So there is a proof that a model what's needed. And what we're doing now is trying to do diligence on what is that investment model? What would that actually look? Like all the different places I mentioned. Obviously, have different level of, you know, regulations incentives. Those kind of things in those areas, and we need Capital, right? So, we can put up our own, but we're going to have much more impact if we do it with a couple of other brands or retailers, are we?
Hayete Gallot
15:43
I set a goal of being a zero-waste organization across all its stores, distribution centers in headquarters by 2025. They have already been able to divert about seventy percent of the waste that used to go to land fields. And Kate says, this is another place where the change Being made at REI are having Ripple effects through all the retail industry.
Kate Wendt
16:04
You probably experienced this. If you do any shopping online, you know, a lot of stuff comes in these plastic bags called poly bags and, you know, it's a huge amount of waste. It's also just an operational hurdle. And what we have done is actually created a process for all of our stores to aggregate all of those, we back, Paul them to rdcs, and we sell them to treks, and they become decking. So when you think about also, the idea of closed loop, what has been a pain point, We have actually created now evaluated service for many of our Brands to actually be fully taken care of that waste in transforming it into something new so creating it as a material versus something that's going to end up in the oceans.
Hayete Gallot
16:45
Not only does REI. I send those plastic poly bags to be recycled but their suppliers are now part of the process as well. Kids is dis plan to limit the number of bags in to recycle the ones they do get actually came from one of their Frontline. They got tired of pulling plastic bags off all the products, they received feeling that it was a waste of time and bad for the environment. Another hugely impactful idea came from the purchasing department which decided they needed to change their metrics.
Kate Wendt
17:16
So Merchants being largely our buyers, you know, who decides what goes in an REI store or online. Those are Merchants teams, they have a lot of power and Retail organization. And, you know, I think for a long time, you know, they had been largely true. Rained on what there were important metrics were things like inventory, turn, and margin and sales and those kind of things and really sustainability was something that was sure I get that, but that's kind of off to the side. Like that, might be bonus points, and we really did a lot of work with that organization to create them as internal champions of those puddings, our sustainability metrics and expectations. We now score all of our Brands based on it, that product impact standards and questionnaire, and they are actually prioritizing vendors and products that meet those attributes. And so they're actually become our greatest Champions and I think, for a lot of them that's really brought so much meaning into their work. It's not just, hey, I work for REI as an umbrella, right? And therefore, you know, I have the Green Halo. No, I am actually through the work that I am doing. I am helping direct drive and actually move the needle across the industry on sustainability,
Hayete Gallot
18:27
Kate, and the whole team at REI I have proven to be leaders on flexibility. Like mother nature their force to be reckoned with. And a few years ago, they were about ready to make another big change. They had a plan to sell their headquarters in Seattle, and they were building a brand-new space nearby in Bellevue.
Kate Wendt
18:40
It was going to be a state-of-the-art facility from a sustainability perspective, but it was one building under the model that everybody would come into the office, five days a week, and everyone had their own desk. And everybody was expected to come in and that was culturally, how we'd always done things and there a lot of benefits to those. There will also a lot of drawbacks, you think about Community, does that only happen in one location and a headquarters? You think about commutes, right? So how much time people were spending in cars, which obviously gets back to the carbon footprint as well, but also just if one of our priorities is time outside, and we believe that our employees should have a whole life for a lot of people that was, you know, a big, a big barrier. And it was hard to balance, many of the things that they had going on in their lives. And we also had employees distributed all over, you know, the area. So picking one point that was a different point that we had before. Is very disruptive for people. I also think that the pandemic showed us that we weren't sure that we could make it work doing virtual or hybrid work, and it actually worked quite well. We decided to Pivot to obviously, we sold that headquarters to Facebook, and we are now piloting what we're calling more of a satellite office model even in this area. So we have three different spaces that our employees can go to. So when they need or want to come together more around the work and why less so around. You know, you got to be in on a certain open day and so often that looks like team. Gatherings that looks like workshops working sessions, but almost all of those are still hybrid joke about a pivotal moment to go from building.
Hayete Gallot
20:07
A brand-new state-of-the-art facility to moving away from the idea of a headquarters at all. (Kids) says the response from their employees have been tremendous but it hasn't been without its hurdles. Well REI is tried to ensure that all meetings and events can be held in a hybrid manner. Some things just had to be done in person, at least that's what they thought earlier.
Kate Wendt
20:31
This year, we relaunched our lifetime membership proposition, and all the benefits underneath that. And for something, as significant of that, we really need to do some, you know, kind of Wok's of like, let us go through the customer journey in the customer experience. At all of our different touchpoints. Let us make sure it's cohesive. Let us be able to put sticky notes on likes people to call things out. Well, how do we engage our remote employees around that? Or people who weren't comfortable, coming to the office yet. So we had some really cool technology. G around people being able to be fully part of that discussion and actually just being able to see and engage with those customer Journeys. In a hybrid manner,
Hayete Gallot
21:04
Kate is actually talking about the Microsoft Surface Hub. I actually had the pleasure of launching this product, for Microsoft our ID or there was really to enable people to have meetings together whether you're in the room together or in a hybrid mode. But also to collaborate and create this immersive experience where you could do whiteboarding, Together and co-create and I would really addressed their need. They have been so many changes for Arie. I over the years and you might wonder how all this affects their revenue. Kid says, it's proven that what's good for the planet actually coincides with what's good for their bottom line.
Kate Wendt
21:43
A couple points that we have their. I mean certainly there's a high amount of payback just in terms of getting after things like Energy Efficiency across your operations. I think those are more of the no-brainers. They often have a very short period payback, so I went diving deep into that, I would say, what's been really interesting that we have seen is two things one, as we have gotten better data and understanding around. When I talk about products, that have preferred sustainability attributes to Consumers actually care. And we have seen actually an accelerating proof point that the answer is by far. Yes, so the percentage of our products that actually drive an outsized amount of demand that has been growing, your every year when even those that have the most preferred attributes for sustainability that's about, About 16% of our products that we sell and that's driving over a third of our demand and that is an accelerating Trend. So I think we're seeing increasingly the, we don't need to prove that consumers wanted and that they care that it's good business and that's part of why they're going to come to us in the first place. The other one is when we talk about the circular economy, I think that's started with like great. That's a great way to drive more margin recovery on our damages. Sure. And if you're not already doing that and you're in this cup of business, I would highly recommend It, it makes a lot of sense both for the consumer and from a business standpoint, but we're seeing that's really compelling as well. Is that our members who engage in the circular economy and largely through our use business Drive outsides amount of lifetime value? So, we look over, we have long tenured members, those sort of things, but it really becomes an accelerant for both existing members and then it is a really big membership acquisition driver on the other side as well. So bringing new people into the organization new customers. Obviously everyone wants to be broadening the their relevance and they were all sides of their customer base and that's been one of the key Vehicles we can do that. That's really differentiating. So those are some of the things I would say that along the good, good for business. Similarly, as we will start to talk to some of our suppliers, over in Asia about this energy transition, we're talking about that is not just with an idea of you know reducing carbon and hitting commitments. Those things definitely have a really strong business case and Roi with a relatively quick Payback Round just the Energy Efficiency that you would get from transitioning to more clean energy sources.
Hayete Gallot
24:01
And that membership, acquisition piece continues, to be one of the major goals for REI, they actively use data to better serve their members and to inform their sustainability. Journey kid says, not only is this work good for the company is good for the planet.
Kate Wendt
24:18
We really thought about it in terms of, how can we help drive inclusivity? So a big piece of this is done people. Feel welcome. They feel safe safety. Being a particularly big issue recently, for a long period of time. We may talk as an organization about how wonderful it is to go out into the woods. Well, you know if you're a black person in the Southeast, going out into the woods, made me a very different thing. How do we understand that? How do we talk to people in a different way? How do we actually create Community groups and partner with organizations who are actually trying to change that and make that happen like outdoor, afro for examples, it's a great partner of ours? So really partnering with Organizations at the local level to drive change. There it is. Being inclusive in terms of marketing. Right? So how are we expanding relevance of? You know, we talked about copy our marketing materials that kind of stuff. Yes, it can be things like language and how things come up. It can be our product. You know, a lot of people may not think about this, but when you think about inclusive colorways, a lot of people when they think about skin tone and how certain colors that they gravitate to might be more flattering on their skin tone, how are we thinking about movies that we might be? Perhaps unintentionally, not welcoming to People based on the color ways that we offer. So, there's really a lot of work happening there around, just inclusivity and welcoming belonging. We're also trying to do really a lot at the local community level. This is an issue that really varies depending on where you are in the country and there are different organizations doing great work. We have been had a long history of offering grants and work with local nonprofit partners and actually trying to organize more, you know, community events and those sort of things to really bring people together. And Themselves in getting outside. And I would say a big part of it, too. Is even from an Enterprise strategy standpoint to I think, you know, we have long been known as a company that is well-known for camping and Hiking. That's not how everybody gets outside thinking about activities like cycling and running. We don't have to convince people of color to do activities. They're not already doing. They already in millions by the number are getting outside via cycling and running and other activities. How do we meet them where they are and help them feel? Feel like they belong, and they're relevant, and we have things for them to serve their needs. So I would say also it gets down to location. Are we in the communities that we present where they are from both of physical retail standpoints or our experiences or events or other ways? Where we're coming again to those communities? Versus expecting them to come to us?
Hayete Gallot
26:46
Caden, the team at REI. I have also learned a lot on their journey to be more inclusive. We have a lot, we can learn from their journey to
Kate Wendt
26:51
Microsoft has one of the most Assist in comprehensive climate commitments. That's out there. They made it around the time when we were making ours and I think we were Lee drew a lot of inspiration from it. There are some companies out there that aren't really taking responsibility for their full emissions if you think across their whole value chain. Or that are saying well we're going to sign up for it but it's really you know it's really gonna be up the emissions intensity so it'd be like the carbon per unit of Revenue, so we can still grow, but we will make it less bad and I think they have really done it. Excellent job around setting bold commitments, and also open sourcing some of the work that they're doing which is really important. So, yes, you know, it's an organization that obviously has a tremendous amount of resource connection access to technology access to Partners globally that can actually make this happens, you know? And we're fortunate to have them headquartered obviously not too far from us here in Seattle. So look forward to doing more partnership down the road about not just what we can learn, but are there ways that we can partner together?
Hayete Gallot
28:03
I think a lot of people think technology is going to save them. Technology can only save you if you have Clarity of what you want to do with technology and with REI it's so exciting. And with Kate to see how their Clarity of purpose as enable them to just use technology with Clarity, whether its data to inform, what they do with their members and how they go to acquire more, whether it's how it informs their sustainability Journey or whether it's how they work together. Think about this. Did you just sold their headquarters? What a bold movement on their part but it's Because they had Clarity. Why do you want people to drive to work? Why do you want to consume all that electricity every day in that building? They just new it was not right for them based on their purpose. Thank you for listening to pivotal. I would love to hear your story and your pivotal moment. So don't hesitate to follow me and share on LinkedIn. Audience information is also available in the show notes. Our show is produced by large media. That's Lar. Jay media special thanks to lean Yang and our partners that we Communications. Jay media special thanks to lean Yang and our partners that we Communications.
