ESG: The Triple Bottom Line and Why It Matters with Tim Mohin, Partner and Director at BCG.

Welcome to another episode of the Solar Podcast. Today Dave is talking with Tim Mohin, principal and director at BCG. Join us as they discuss Tim's impressive career as a sustainability officer at companies like Apple, AMD and Intel. They also discussed Tim's time as the chief executive at the Global Reporting Initiative and the landscape of laws and regulations affecting sustainability today. Let's get right into it on the Solar Podcast.

Dave Anderson (00:36):

Well, welcome everyone to the Solar Podcast. I'm Dave Anderson, the host, and we're thrilled today to have Tim Mohin with us, who is an executive, an author and all around great guy. We're going to spend a lot of time today talking about work that he's done formally as the CEO of ESG Advisors and now more recently, with BCG as the famous consulting company, and we're going to talk about it from the perspective of sustainability and the things that he really has been expert in. He can easily be found online. He's given numerous speeches and talks. I've had the opportunity to consume some of those before. So thrilled to have him on the podcast. Welcome, Tim.

Tim Mohin (01:11):

Thank you, Dave. It's a pleasure to be here with you today.

Dave Anderson (01:14):

Yeah. So Tim, I'm sure that there are things that I didn't cover in terms of your biography that our listeners would love to hear about yourself as well. So maybe you can tell us a little bit more about yourself personally and otherwise.

Tim Mohin (01:23):

It's a long tail, Dave. I've had many jobs but only one profession. I've always been in sustainability. In fact, when I got into this field way back when, I'll probably date myself here, we didn't really have that term. Sustainability wasn't coined yet. In fact, at that point, if you wanted to be an avowed environmentalist, you had two choices. You could be an activist. You could go work for Greenpeace or something like that or you could be a regulator. I chose the regulatory path.

(01:56):

I started off my career in the federal government. I was with the US Environmental Protection Agency for over eight years and then I moved on to the United States Senate and worked on various legislative issues. So some of the big ones of the day were the Clean Air Act, for example, which is still very much law today, super fun, clean water. But my big issue when I was in the Senate anyway was environmental technology, which is very germane to the conversation we're having today about solar power. We may have been ahead of our time. The idea that the public sector and private sector can work together to actually bring these technologies to market is something we talked about way back when, this is in the '90s, and now we're seeing come to fruition today. So that's an exciting symmetry for me to get into in this podcast.

Dave Anderson (02:50):

So I would love to hear, just again because your career spans this idea of sustainability, what are some of the things that we maybe got wrong early on in your career that you feel like we're starting to get right now as you've seen an evolution in your career?

Tim Mohin (03:03):

Yeah, it's a great question. I left a few decades out, but when I left the federal government, I actually worked in the private sector for 20 years, Intel, Apple, AMD. I was the CEO of the Global Reporting Initiative, which is the big sustainability reporting standard.

(03:23):

But to answer your question, based on that background, I think there has been this massive coming together of the public and private sector. We've really seen that the issues of climate change in particular have become so evident that even the financial sector is looking at this as a source of instability. And so the government has really stepped in and said, "What can we do to try to make the transition from fossil fuel power to renewable energy?" And you're seeing it in the Inflation Reduction Act. You're seeing it in the disclosure rules that the Securities and Exchange Commission is currently proposing. You're seeing it across the world in capital market regulation requiring new disclosures from all sorts of companies. So this is all starting to take shape, and it's really interesting for an old guy like me to see it go from this fringe activist issue into the mainstream of global commerce, and that's what we're witnessing today.

Dave Anderson (04:25):

Yeah. Obviously, this last year, we had one of our biggest pieces of legislation in the history of the United States, I would say anyway, in the Inflation Reduction Act. That is obviously an act of government that's certainly going to help facilitate and bring to pass through the private market or through the private sector a lot of business. What are your just high level takes on the Inflation Reduction Act and what are the things that you're particularly excited about? What are the things that you wish would have made it into the bill? I know it's a huge bill, but maybe you can comment a little bit about that. There's still a lot of people that are trying to figure out what all of the implications are, and I think that those things are being sorted out right now actually. But anyway, I'd love to get your take on that, obviously, coming with your background that you have both in government and in the private sector.

Tim Mohin (05:17):

So at a high level like many people who are from my background, more of the environmentalist background, I couldn't be more happy with the Inflation Reduction Act. The most publicized number is this $369 billion that is going towards subsidies in the form of tax credits and grants to really get more renewable energy out into the world. And I know that's a very broad statement. There's lots of different nuances in detail, but one of the hidden stories is that that number is actually an underestimate. Those tax incentives are uncapped, and some analysts have looked at it and said it could go as high as even double that number. And so it's really, really exciting to see what's going to happen in the next few years as this law starts to take effect.

(06:12):

And I really think that because it is now law, it's really going to be hard to undo. So we have a lot of political back and forth on these issues as you know, Dave. When I get this question about the Inflation Reduction Act, I said this is settled. I don't think it's going to change. I think you're going to have this momentum for a good long time, and I think you're going to see its effect on bringing the renewable energy numbers up over the subsequent years and decades.

Dave Anderson (06:42):

Yeah. I think some of the parts of the Inflation Reduction Act that are uncapped are relating to the investment tax credit. There's 30% investment tax credit that exists for many different types of renewable solar. Obviously, as the Solar Podcast, that's the one that most affects us. There are others however that do have some caps on them. A lot of that has to do with changing heat pumps, for example, as part of that bill. There are some caps on those sorts of things. And then there are some things that are being figured out in terms of what the overall impact would be, and a lot of that is the domestic production and the domestic manufacturing, what qualifies for domestic manufacturing?

(07:17):

And generally speaking, that's something that is exciting to me to understand and I think is also good not just for the renewables industry but also good for the United States generally, is this domestic content piece. Anyway, I'm not sure if you've had an opportunity to look too much into that and what your take is on the domestic components of this, but it's certainly something that we've kept our ear close to the rail on to really understand what the impacts are going to be.

Tim Mohin (07:43):

Yeah, you're right. I don't profess to be an expert in this. I know that companies like First Solar and others in the United States have really made their mark. I worked in the semiconductor industry for a very long time. And many of my colleagues, because it's a similar technology, went over to the solar industry. But as you know, there are massive trade issues associated with renewable energy, undercutting of prices and now with the subsidies from the IRA where you're seeing movement from the European Union especially to answer in kind. And so I don't think we're quite done with this story yet. I think international carbon border adjustment mechanisms are going to go into place and you're going to see all sorts of different tit-for-tat trade issues now coming down on the issue of climate.

Dave Anderson (08:33):

Yeah. In the United States, it's tricky, right? Because on the one hand, you've got the regulations that make solar more affordable through the Inflation Reduction Act. Mostly it's an extension of the ITC. And then on the other side, there are these tariffs that are in place that create added cost to the solar industry as well, and so you've got attacks on one side and a subsidy on the other side. It has a lot of confusion.

(08:55):

So one of the things that I think a lot of countries have gotten right so in the case of Australia, for example, they have complete free trade and the costs, the turnkey costs as well as they have a single less bureaucratic, less distributed AHJ model where you have all these different authorities having jurisdiction that are essentially keeping the soft cost of solar high. You've got places like Australia that are deploying residential solar for probably a third the cost of what we're doing it here in the United States at the residential level.

(09:26):

And so what I'd love to see is some regulation around what are some things that can be done to help keep the soft cost of solar much lower so we can standardize some of the things like permitting? It's one of the things that actually comes up a lot on the Solar Podcast, but I'd love to get your sense on that. What are some of the things, bureaucratically that you think are actually impeding or getting in the way of sustainability and renewable projects or renewability or renewable initiatives like solar from being able to proliferate even faster than they are right now?

Tim Mohin (09:57):

You mentioned it, Dave. It's the red tape. So if we can just cut through the red tape on this stuff, we can probably do as much, if not more than the actual subsidies themselves. I think many utility grade down to residential are just tied in knots from permitting to land use to you name it. We have to find a way to just make it easier to actually install this. The capital cost is already enough of a deterrent, but when you layer on a lot of these regulatory requirements, it becomes a daunting mix to get there. We all know that the cost of solar is less than the price per kilowatt of fossil fuel, which is fantastic. We're seeing growth rates in residential of over 30%, which is amazing, and we need to continue that.

(10:45):

I think the subsidies are there now. A lot of them actually do have some additional bells and whistles. As you know, there's a lot of environmental justice concerns or additional provisions in the IRA, which are good, but I think as you add more and more requirements on top of the ability to add solar, you're seeing that that creates a burden.

(11:08):

So years and years ago, I was involved in something called Project XL. I'm dating myself. This is in the Clinton administration, but it was an initiative to cut through the red tape for companies that wanted to do the right thing, and this was on the issue of air pollution. And my company at the time, Intel, signed up for it. We were selected. There was a big White House ceremony. And in essence, we were able to build not one but four multi-billion dollar factories under a single permit without having to go back for permit renewals each and every time, which were costly and difficult. And so it's that kind of initiative that we're going to need to have from the government, from the administration to cut through the red tape in order to allow these installations to go faster.

Dave Anderson (11:56):

Yeah. We had Jan Rosenow, who's an expert on regulation in the EU, and he talked about that, this idea of being able to have a standardized permitting process rather than the individualized permitting process that we go through on the resi side. For big utility scale, maybe pulling a second through a third permit, while very expensive, it's not nearly as onerous as it is to the installation companies that are doing in the thousands of installs every month, trying to figure out how to get individual homes permitted and how to pull permits and build plan sets and build designs, which for the most part, it's really just reproducing what you've already done but doing it a thousand times in a row. Those sorts of things are things that I think certainly could help cut the cost. I actually didn't know of an example, a domestic example like what you had shared with your experience in Intel, so I'm thrilled to hear that it's actually happened somewhere in the United States.

Tim Mohin (12:48):

It was a while ago, and potentially the political conditions don't exist today but it's an interesting question. This is more of a conjecture on my part because when both parties can agree on something, it tends to happen. And I think both parties could agree on cutting regulatory red tape when it comes to renewable energy, so maybe we're on to something here, Dave.

Dave Anderson (13:13):

Yeah, I agree. There really are still, unfortunately or fortunately in terms of the checks and balances, there's some really loud voices that come from mostly the utility companies, at least on the solar and many of the renewable side. Outwardly, they certainly express a lot of interest and a lot of openness towards this transition to renewables and sustainable energy. But secretly or even in the background, it seems as though they're fighting pretty aggressively against it. California is facing a pretty dramatic change in the net energy metering program that exists for residential customers today. That goes into effect in the middle of April, and it happens pretty abruptly and pretty just one day, we'll have NEM 2.0, which is very favorable net energy metering program and a very successful net energy program in the United States. And the next day, we'll have NEM 3.0 where the economics change pretty dramatically to the homeowner.

(14:13):

Moreover, we have an industry that has very well established installation crews and a pretty well established process for installing systems. And again, as soon as that NEM 3.0 switch happens, the way that we install systems, the type of equipment that we have to procure specifically around batteries is going to change pretty significantly, and California is definitely going to feel a huge blip or decrease to the amount of solar deployment that they have.

Tim Mohin (14:41):

Yeah. I think one of the hidden stories in this discussion is the voluntary market. We're talking a lot about regulations, both the carrot and the stick, as well as the red tape, but so many companies now have made these net-zero commitments. I was in the big climate meeting, COP26 in Glasgow a couple of years ago where we had the financial industry, almost the entire world's financial industry come out and say they're going to have net-zero portfolios by 2030, 2050 in some cases, and many of them signed up for this without really knowing what that meant. But when you have most of the world's assets really focused on net zero, it drives this voluntary market because it's got to come from somewhere. And so I think by far, much of the new installations on solar are being driven by this voluntary demand.

Dave Anderson (15:42):

Yeah. A little bit of a change gears, but we've talked a lot about sustainability initiatives on the Solar Podcast. I think this is the first time we've ever had a sustainability officer on the podcast, which I'm thrilled about. So maybe for our listeners, if you wouldn't mind just explaining, what was the day-to-day responsibilities that you had as an officer within a large organization really just focused on the sustainability of the organization? I'd love to get a little bit of a day in the life.

Tim Mohin (