Senior VP, General Counsel & Corporate Secretary, Honeywell
7 30 2024 Power Huddle Inside the Minds of ESG Gurus Honeywell
In our upcoming session we’ll meet Su Ping Lu, Vice President, Corporate Secretary and General Counsel for ESG and International at Honeywell. Su Ping’s responsibilities weave together SEC compliance, securities offerings, corporate governance, M&A and other corporate transactions, ESG initiatives, ethical frameworks, political law navigation, cybersecurity measures and international counsel. Su Ping has played a pivotal role in establishing Honeywell's sustainability program enabling her company’s successful execution of several significant M&A transactions. Join us as we chat with Su Ping, a...
About Su Lu
Su Lu, Senior Vice President, General Counsel and Corporate Secretary at Honeywell, participated in a Thompson Hines "Power Huddle" webinar on July 30, 2024. During the discussion, Lu described her role as encompassing SEC compliance, securities offerings, corporate governance, M&A, ESG initiatives, ethical frameworks, political law, cybersecurity, and international counsel. She stated that she played a pivotal role in establishing Honeywell's sustainability program, which she said enabled the company's execution of several significant M&A transactions. Lu discussed the company's approach to ESG data management, noting that Honeywell went through a "build versus buy analysis" and uses a mix of internal systems and external tools. She commented that approximately 75% of data needed for CSRD reporting exists within the company's systems, and the challenge involves extracting it with proper governance. Lu observed that voluntary disclosures are increasingly being viewed through a compliance lens, which she said "is going to become the bigger center of gravity." She also expressed frustration with external parties conducting "surface scrapes of information" without digging into substance, stating that "at times it felt like they should be sued for libel."
Transcript (35 segments)
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Heidi Fredman0:12
Good afternoon and welcome to the latest installment of Power Huddle: Inside the Mind of ESG Gurus. I am Heidi Fredman, a partner and co-chair of Thompson Hine's ESG Collaborative. During this monthly series, I am so honored to chat one-on-one with innovative ESG executives. These unscripted discussions will examine how these company execs from various industries are actively paving the way in ESG, I'm sorry, as ESG trendsetters and championing pragmatic ESG strategies to align with business values while building a sustainability framework to advance their ESG goals and practices. Joining me today is a true ESG guru, Su Lu, Vice President—this, hold tight because there's a lot on her plate, wait till you hear this—Vice President, Corporate Secretary, and General Counsel for ESG and International at Honeywell. Su's responsibilities weave together SEC compliance, securities offerings, corporate governance, M&A and other corporate transactions, ESG initiatives, ethical frameworks, political law navigation, cybersecurity measures, and international counsel. Su has played a vital role in establishing Honeywell's sustainability program, enabling her company's successful execution of several successful M&A transactions. I do not know when Su sleeps, but join us as we chat with Su, a Six Sigma Green Belt certified luminary who is at the forefront of innovation in global corporate strategy. Just a few quick housekeeping items: today's program is being recorded and will be available along with the previous ESG Guru series in our library of recordings on Thompson Hine's YouTube channel and will also later be part of our Environmental Laws podcast series. This presentation is intended for general information of individuals and organizations on matters of current interest. The thoughts and opinions being expressed today are those of the individual panel members only and do not necessarily reflect the opinion of the panel members' clients, employees, affiliates, or Thompson Hine. The content should not be taken as advice as the views expressed are for informational purposes only. If you do have comments or questions, I really encourage you to share them. Please put your chat to Heidi Fredman and as Su and I get through our chat this afternoon, I will try to integrate those comments and I promise to follow up with any questions we do not get to. So Su, welcome. Thank you for being here today. I'm so excited to chat ESG with you.
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Su Lu3:06
Oh, thank you so much, Heidi. I'm super excited to be here. Honeywell has a longtime partnership with Thompson Hine across a lot of different areas of our legal practice, especially in my area, so super happy to spend some time with you on this very important and interesting topic. I know we've spent lots of time in our past chats on ESG, so fun to do in this mode as well.
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Heidi Fredman3:33
But tell everybody a little bit about your ESG journey because it's a little bit unique and different, and I think everyone's journey is so interesting.
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Su Lu3:42
Yeah, I think everyone comes to ESG in different ways. And when people talk to me about, well, how do you get into ESG or sustainability, a lot of times what I say is, well, really it doesn't matter what you decide to do coming out of school or otherwise because there is probably some area of whatever you're doing that will touch on ESG and the way that it's formed. And so I come to ESG from a classic corporate securities law practice. So I joined corporate—I was elsewhere at Honeywell in our Aerospace division—but I joined corporate in 2016, toward the end of 2016. And my role was to cover our securities law compliance, disclosure, IR, corporate finance. But my predecessor, you know, on the day she walked out the door, she handed me an MSCI report with a bunch of comments on it and said, 'Yeah, this is an issue.' And that was kind of my introduction to ESG. Really hadn't, you know, it had been many, many years since I practiced in the corporate space before joining Honeywell, and so that was my first sort of interaction with ESG and just seeing all of the different things at the time that we were being rated on and being rated on incorrectly or where we were not disclosing things that would help us with that. And that became sort of my first kind of look at, well, here is all of what is part of ESG. But I was super fortunate because Honeywell actually has a long legacy in this area. And it wasn't termed ESG at the time, but we had back in 2004 started setting climate goals. We've always had a huge focus on safety given the kinds of businesses we're in. Remediation—I mean, we have a ton of environmental legacy liabilities—and so remediation and doing that with the community in mind, sort of a very early version of environmental justice, we had been engaged in that for a long time. And so I was super fortunate to have just lots of partners throughout the Honeywell organization that could really help me understand sort of the ins and outs and some puts and takes of what we were being measured on from an ESG perspective. And so that's how it came to be. It was really around our external communications and some of these ratings firms that our investors were interested in working with and looking at.
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Heidi Fredman6:08
Yeah, so you sort of came into it with your governance hat on almost on some level and now have been embracing that ever-growing umbrella that we've chatted about. And I do think it's worth a minute just to talk about these ratings and rankings and things like that before we get into this regulatory scheme where we're faced with, because I do think that clients get very troubled by these external rankings that you cannot participate in. And I would say like my take on them is while it used to be based on transparency and just how transparent you are, now it seems to be shifting to actual, you know, where have you moved the needle. And do you have any advice to folks about those kinds of ratings and rankings and how to view them?
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Su Lu6:57
Yeah, you know, I think we've been back and forth on this, and I think in my head I've been very back and forth on this because it is so frustrating to have people who really don't know us and they're kind of doing very surface scrapes of information and looking for very specific words and not digging into the substance and having them write things about you that people you care about subscribe to. And it felt very irresponsible at times. It felt like, well, they should be sued for libel. You know, we've gone through a lot of different sort of emotional reactions to it. And then at the end of the day, I think what we've learned is there's an element of this where you just kind of have to track it and participate in it just so that the incorrect information is not out there for the world to see. Because I think, you know, I'd like to think that our investors and our key stakeholders, they're smart about this, right? They understand that it's not the end-all, be-all. But at the same time, it pops up on their Bloomberg screens if something changes in that area. And so love it or hate it, you kind of have to interact with that ecosystem. But you know, I think what has helped over time is a recognition, I think not just at Honeywell but elsewhere, that it does kind of take resources to actually stay on top of it. And so that's helped a lot where we've, you know, it's kind of like however many steps of grief, right? You get through it, you realize, well, now I just have to find the most efficient and best way to manage it.
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Heidi Fredman8:35
Yeah, tracking it I think is definitely essential. But at the same time, sort of what you guys are doing, which is focusing more energy and attention on your actual goals, you know, what your stakeholders are important, moving those and reporting on those, so sort of it becomes louder than the noise that you're hearing from the rankings, I think is helpful too.
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Su Lu8:56
Yeah, yeah, I totally agree. It's about proactive, always think these are the parts of the story that are not just a story, that are really about Honeywell and are actually really kind of critical and important to our go-forward strategy as a company. And then there's kind of just the nuts and bolts and plumbing of managing how people are responding to that in the ratings. So you gotta, you know, I think where we've moved over time is toward what are our goals and commitments that we really want to put out there—not just put them out there, but because it's meaningful to us strategically. And then honestly moving now toward compliance, right, where a lot of these disclosures that were voluntary, we have to think about through a compliance lens. And I think over time that's going to become sort of the bigger center of gravity around what we're doing and working on.
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Heidi Fredman9:54
But it's a great transition. I will ask you about that. So I mean, I think we like, it's almost like, wow, look where we got from the voluntary piece of things, right? Like, can you believe it? And now we have this ever-growing regulatory regime everywhere from the state to the global level. And you guys as a global company, although you're way far ahead, I would say in my view, on most of these things, but how are you getting, you know, despite the stays and everything like that, SEC ready or CSRD ready? Or how are you managing all of the shift?
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Su Lu10:31
Yeah, I mean, we've been tracking this for a long time. And I think finally it was, okay, we can't just track it anymore, we got to actually start doing things because we actually have real deadlines. And you know, for us, we've been very focused on meeting the global requirements more so than the US ones because those feel like they're still in flux. But we feel like by focusing on getting CSRD ready and assurance ready there, that we will be 90% of the way there in terms of what we need to do from an SEC perspective. But you know, we've been reporting on a lot of these things for a long time and we've been getting assurance on a lot of them. It's just it's a different level of controls that we're looking at now as we look at transitioning from a boutique assurance firm to more of a Big Four mindset, reporting across a broader array of metrics, some of which we already collect and report and some of which we don't. So it's really been a huge cross-functional sport for us in areas that really haven't in the past had to think so much about public reporting and the responsibilities that come with that. And so, you know, it's a huge part of it for us is data and having good data governance, people who are data specialists, data stewards who can really help us put that good governance structure around data that we did use to collect in this way. It's about putting the technology stack in place, finding the right technologies to buy or to build, about getting our controllership function involved, right, to draw the SOX-like control processes and procedures. And it's a huge journey that really requires a lot of leadership and cross-functional buy-in to get to.
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Heidi Fredman12:28
Yeah, I love cross-functional sport. That's amen. That's, I mean, and the way you guys do that is so well. And I think the challenge, right, is as a governance person and where you came from, usually you're reporting on what happened in the past, right? Like, what did we do? And even though there's a component of ESG goals that is talking about what did happen, it's very much also forecasting, which is much more difficult to assure and is much more challenging.
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Su Lu12:56
It is. And it's also about choosing where it is that you're going to make these go-forward, forward-looking commitments. Because not all ESG topics are created equal relative to materiality and what's actually important to our strategy or what is actually a risk, like an enterprise risk for us. So, you know, it's being able to bring the organization along strategically to where it is that we really do think we need to have those forward-looking goals and commitments. And then really understanding our path to achieving them, not just putting them out there, right? You know, what is your roadmap to getting there? And I've, you know, in our discussions with investors, others, I think the focus more and more has been around, okay, it's great that you have all these great targets and commitments out there, but what are you going to do to get there? What are the key levers? You know, are you on track? How does M&A factor into it? So those much more tactical, you know, how are you going to do it questions have become much more important to understand.
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Heidi Fredman14:07
Yeah, I would say the number one mistake that I have seen lately is companies not considering as part of the due diligence process what the acquisition or disposition might do to their ESG goals and how that reporting might change. So, you know, including it as you mentioned in that process and your great background in all of that is probably really helpful.
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Su Lu14:31
Yeah, it's, you know, I think ESG takes people from all different backgrounds to, you know, requires that kind of contribution and the headsets. And so that's, you know, going back to the initial point, I think you can get into ESG from so many different lenses. If this is an area of interest, there's a lot of different areas of expertise that you can have that is a required kind of ingredient at the table for this, for sure.
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Heidi Fredman14:59
And you mentioned data. I would say clients are always looking for suggestions on data right now. Are you managing all of your data internally with your internal systems or using an outside amalgamation firm to gather and sort that for you?
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Su Lu15:17
I would say that it's a mix. So we went through sort of a build versus buy analysis and decision making. You know, I don't know that there's a perfect tool out there yet that you sort of plug into and all of a sudden everything kind of spits out the other end. So love to hear about it, you know, if anybody wants to put that in the chat because we need that, that would be fantastic. Yeah, so we're looking at that. I mean, a huge part of the journey for us has been thinking about, well, what is our technology stack and how do we plug into existing systems? Because I would say 75% of the things that we would need to report under CSRD, we have in our system somewhere. It's about getting it out in a way that's controlled and that has good governance and putting it through a calculation engine and then having a single source of truth after that. And so in some areas, like in most of the environmental spaces, we're looking at buy solutions. I think in a lot of the more in the social and governance spaces, it's about building on top of the platforms we already have to make those types of quantitative metrics disclosure-ready. But I'm sure it's different for every company because I think every company kind of comes from a different platforming in terms of these different types of metrics. And then there's some things that we haven't collected ever in the past and then figuring out what that is and is it truly material if it's something that we've never really cared about enough to collect the data that's needed. You know, does it really rise to the double materiality standard, right?
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Heidi Fredman17:06
We've all been talking about, I know double materiality is like the bane of everyone's existence now. But so I mean, would you say, so what would you say is your, with all of that as background, what would you say is your biggest ESG-related challenge right now?
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Su Lu17:20
Um, it's the technology. It really is. It's the technology. Because you got to get that in place before, you know, how we then draft and document our controls and our control points and our, you know, control features will depend on the technology that we're using to aggregate and calculate and spit out the information. So that to me, in terms of our journey at least, is where we are really focused on getting up and running. Because, you know, for us, we're going to be reporting in 2026 over 2025 data. So we want to just be ready using the systems that we intend to be relying on to collect our 2025 data.
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Heidi Fredman18:09
Yeah, the whole one spreadsheet thing is something of the past, Excel spreadsheet. But and then I mean the other challenge, I think with everything, I mean, you have international sort of all over your title and all over your responsibility. You guys have so many different business units that do so many different things. So how do you integrate everything into sort of one materiality assessment or prioritization—I hate the word materiality assessment because I say this all the time, but it's like such a term of art—but let's say prioritization assessment. How, what is your sort of best practices for other companies that have so many different kinds of businesses?
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Su Lu18:48
It's about making sure you have the right stakeholders involved. And part of it is also thinking through that initial question: are we going to report on a global basis? Are we going to report at the MTU level? Are we going to do it based on an artificial consolidation? And I think doing, you know, you have to start somewhere. For us, the easiest place to start was from a top-down rather than a bottom-up. And so from a top-down perspective, because so many of the functions that play into a lot of the ESG topics for Honeywell is centralized at corporate, there are touch points, you know, kind of subject matter experts that really understand all of our businesses across the network and across the globe and are able to think about materiality on a global lens. I think what will become more nuanced for us is if we decide that we need to do the reporting at a non-global level, so either at a subsidiary level or otherwise, where we have to really think a level more, you know, think a little bit more specifically by business or by geography. But you know, at this point, that feels like it's introducing a level of complexity that maybe we do or don't need. So something kind of jury is still out on that piece. Having centralized subject matter experts has been really helpful for us.
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Heidi Fredman20:21
Okay, because you guys have like an ESG Council that you utilize basically?
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Su Lu20:24
Yeah, we do. So what we have is an ESG—we call it a function—but it sits under me that kind of has the, it sort of pulls things together and makes sure that we have resources where we need to program manage the implementation of whatever the ESG thing is. But we have deep subject matter experts in our health, safety, environment, deep subject matter in the HR areas, deep subject matter expertise in sort of our remediation and environmental liabilities. You know, so we've been, yeah, I think because of Honeywell's legacy of having to address a lot of these issues over time, we have built up pretty strong centralized functions that manage a lot of these different spaces historically.
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Heidi Fredman21:21
Yeah, and just making sure you got the right people is, as you said, kind of the best first step. Let's talk a little bit about the anti-ESG legislation that keeps popping up. It certainly is mostly relating to like investments and pension plans and things like that, but you know, it's a pretty common question. You know, headquarters sit in an anti-ESG state, how much should I pay attention to this? And I feel like you guys have a good philosophy around that. I thought maybe you could share your thoughts on that noise or whatever you want to call it, because there is so much actual ESG work still going on.
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Su Lu21:53
Yeah, I mean, it's really interesting, right? Because it's almost like a reaction to the moniker of ESG or DEI or, you know, whatever the word of the day is that people don't like. But a lot of the things that are encompassed by it, I think everyone would agree are important things to do, right? Managing your emissions appropriately, managing your water use and water pollution, managing your employee base and your talent and developing, retaining, attracting—you know, I don't think that people would necessarily disagree with or in certain areas would disagree with the fact that certain things are very, very strategically important for a company. And so that's what we've tried to focus on rather than ESG as just ESG. It's really about what is actually strategically important to the company and talking about ourselves in that way. And so, you know, for us, when we think about our megatrends that we align our entire portfolio to, we have the future of aviation, we have automation, and then energy transition. And so a huge part of what we sell and our value to our customers is around sustainability in each of those different spaces. And so for us, that's a huge part of who we are. Being able to demonstrate the use of our own products in terms of our own ESG and climate and efficiency journeys is very tied up in, you know, kind of eating your own dog food, right? Like we are using our own, we're demonstrating the use of our own offerings and value to our customers on ourselves. And so setting these goals is important.
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Heidi Fredman23:44
You really just do an exceptional job at aligning ESG with value. And what you guys, you know, you're not boiling the ocean, but yet you're far ahead of a lot of people because you really have strategically aligned value and stakeholder interest with what your goals are.
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Su Lu24:03
So yeah, that's been the key for us. Rather than focusing too much on anti-ESG, it's really about continuing to tell our story based on what is actually of strategic importance to us or is strategic from, I think, a risk management perspective for us.
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Heidi Fredman24:23
Yeah, so what would you say is your biggest ESG success?
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Su Lu24:28
Oh gosh, I don't know. It's too early to call success on anything right now. I mean, I think the thing I would probably be most proud of around ESG is getting organizationally aligned around what we need to do in a measured way, but enabling that understanding of, hey, here's how all the pieces are, you know, here are the pieces we already have, here's how they come together, and here's what we need to do. And that journey of getting just ourselves aligned around that so that we can have a more cohesive and comprehensive messaging to all of our external stakeholders as well as our employees and seeing that play out and come together has been really rewarding. Definitely not, it's way too early to declare success on anything, and you know, those goalposts are constantly moving, but it's super rewarding.
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Heidi Fredman25:28
Well, and you should be super proud of that because that's not an easy thing to do in an area, like you said, that is literally constantly changing. I once said I could probably sit at my desk and read about ESG all day every day if I had time because there's just new stuff. But just a quick reminder, if there's any questions for Su as we sort of wind down here, feel free to put them in the chat to me. But so one of the things you mentioned, I know you sort of talked about the increase in, you know, reverse discrimination, inclusion claims. There's definitely an increasing greenwashing claims, although more in a B2C business framework. But what advice might you give companies who want to make sure they don't end up getting on the other side of the V for a greenwashing litigation claim?
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Su Lu26:16
Yeah, no, that was actually a super early focus area for us because we do, because of our product offerings, there is a lot of opportunity for us to fall into that trap. And so this was actually done in partnership with our CTO organization, which is also the organization that does our new product introduction. And ultimately, you know, product gets handed off to offering managers and marketing. We put in place what we call our sustainability claims database and tool. It's basically a workflow tool at the end of the day that in order for people to be able to publicly make any statements around the sustainability or greenish qualities of any particular product or even about Honeywell at all, it needs to go through the claims tool. And the workflow tool then requires CTO approval, legal approval, marketing approval, and in fact, GR approval as well. And then it gets stored and by policy, you can only use the claims that are in that database with the qualifications or the footnotes. And so that rigor has been really helpful for us. And actually, it worked out well for us because then we used essentially the same foundation to deal with AI washing, which is very cousins with greenwashing. So we were able to deploy that to the AI washing side. But it's just, you know, sometimes you just have to make people use a tool and then you've got control points because all of our external communications are reviewed and making sure to push that back when we need to. But it's just basic blocking and tackling, I think, on that front.
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Heidi Fredman28:14
I'm glad you brought up AI washing too, that's definitely coming up. But so when you do your annual reporting, do you put everything through that system or how do you merge what you're saying and your reporting and your website with, you know, this external claims database?
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Su Lu28:32
Yeah, so when we do our, by the time we get to our ESG report, I would say most of the things in there, certainly as it relates to our offerings or around our performance along certain metrics, we've probably already talked about it in a press release or in our proxy or in some disclosure. So there's very little at the end of the day that gets pulled into the ESG report that is actually new. It might look different, there might be better pictures or graphics, but it's not actually new by the time it gets there. And so, you know, I would say that part of what we're trying to move toward as we do more and more of the reporting and then ultimately the regulatorily required reporting is to move away from this sort of homegrown workflow tool into a platform. And that's the technology element that we're trying to set up.
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Heidi Fredman29:31
So that's fantastic. I took notes on that. That's a wonderful risk mitigation tool and I fully support it as counsel. So I think that's fantastic. So my last question for you, Su, is so you're doing M&A and cyber and ESG and all of the things. When you're not doing those, what do you like to do for fun?
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Su Lu29:51
So I would say from a fun perspective, right now all my fun is with my family and my boys. And so I've got my husband, three boys, and then recently a dog. And so I would say that in my off time, if we're not all traveling together, it's whatever the activity of the day is on any given week. But that is a lot of fun. And I have to keep reminding myself that they are not nine forever, and now for my older one, he won't be 17 forever. And so, you know, kind of remembering to really say, you know, when I have, there's that time that I don't want to lose. And believe it or not, I still, I sort of miss sitting on the soccer sideline these days now that my kids are all grown up.
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Heidi Fredman30:41
Yeah, for sure, for sure. At the time, I don't think I was that when it was raining and freezing, but now it sounds... But I just have to, you are a guru at all new levels. I feel like you guys have the functions, the tools, the foresight, the planning. With you at the helm, Honeywell is well taken care of in these spaces. And we are so grateful for you to share your wisdom and ideas. This concludes today's session. This webinar was recorded and will be available to view in our library of recordings on Thompson Hine's YouTube channel. We encourage you to visit our YouTube page. And we want to thank everyone for attending today. And of course, a special thank you to Su for sharing your insights and your time. See you next time.