ESG Is a Way of Life for Graybar
CEO Kathleen Mazzarella discusses the company and board’s focus on long-term decision making and environmental, social and governance issues.
To Kathy Mazzarella, chair, president, and CEO of Graybar Electric Company, environmental, social and governance issues (ESG) aren’t something new.
“While ESG has become a popular area of focus in recent years, those principles have always been a way of life at Graybar,” she explains.
Public companies are just starting to focus on ESG given the pressure from investors, but it’s typically not on the radar screens of many private companies.
Graybar — a 100% employee-owned private company recently named one of the Private Company Boards of the Year by Private Company Director, Directors & Boards and Family Business magazines — is already addressing ESG, whether it’s diversity in the boardroom or sustainability.
“For Graybar, ESG is not a new idea,” Mazzarella explains. “The principles of ESG are consistent with who we are, what we do and what we stand for as a company.”
This year, she continues, “we’re proud that Graybar is celebrating its 150th anniversary and 90 years of employee ownership. We know what it takes to sustain a company for the long term, and we approach everything we do from the perspective of doing what’s right for our company and its stakeholders, so we will continue to be successful for many years to come.”
The following is a Q&A with Mazzarella who shares her ESG commitment and the board’s role.
Can you name a few initiatives at Graybar that fall under the ESG umbrella?
Our environmental focus begins with our customers. A core capability of our business is helping our customers save energy, use resources wisely and meet their environmental sustainability goals. We do this by offering energy saving products, as well as solutions that minimize waste and improve efficiency.
In addition to helping our customers improve their sustainability, we use many of the same products and solutions in our own business. We’ve learned this is not only good for the planet, but it’s also good for business, allowing us to reduce energy, waste and expense. We incorporate sustainable solutions into all of our new facilities, and we consistently work to upgrade older facilities with new technology. These upgrades have produced a 32% decrease in energy usage on a per-square-foot basis as of 2018. This translates into savings of more than $19.25 million and reduced energy consumption of more than 171 million kilowatt hours since 2006.
As much as we help our customers with ESG supportive products, our employees also counsel customers on ways to make their business operations more efficient. We do this through what we call “opportunity” or “waste walks.” Using a proven continuous improvement methodology, Graybar invests the time and energy to help customers identify opportunities to reduce waste, improve efficiency and increase safety in their operations. This program contributes to improved environmental sustainability in a general sense and specifically helps our customers, their employees and customers enhance their sustainability efforts.
Our social responsibility focus starts at home. Graybar has been employee-owned for 90 years, which shapes our company and our culture in a very special way. Our employee ownership structure provides a unique opportunity for our people — from the executives to front-line employees — to own a piece of the company and share a stake in the company’s success. This inspires a culture where people work together toward common goals and senior leadership considers the impact on employees when making important decisions.
In addition to working to the advantage of our employees, we also give back generously to our communities. With locations across North America, we believe that strong communities are vital for the health of our business and the wellbeing of our employees. We encourage our employees to give back to their communities through volunteering and charitable giving, and as a company, we support causes that are important to our employees. As part of celebrating our 150th anniversary as well as our 90 years of employee ownership, our employees are teaming up to give 90,000 hours of volunteer time and $1.5 million in donations to worthy causes.
From its earliest days, Graybar has upheld high standards of ethics and business conduct. Our industry is facing significant disruption, and to compete, we must transform our company to thrive in a digital world. As we pursue new opportunities for growth and innovation, we will not compromise what we stand for. We will continue to carry out our responsibilities to our stakeholders and act in accordance with our values while we adapt to new opportunities and threats.
We are also transparent about our performance and report our results each quarter. In addition to our required financial disclosures, our senior leadership communicates regularly with employees on the performance of the company. We believe that, as owners, our people should understand what it takes for their company to be successful and how they play a role in driving positive results.
Years ago, we incorporated into our bylaws an obligation, that when our board members vote on a matter, they take into consideration how those decisions may impact our shareholders, our employees, customers, suppliers and the communities we serve. Consequently, each board meeting and each board vote furthers our commitment to environmental, social and governance aspirations.
What role has the board played?
Graybar is unique in that our board is comprised of senior executives within Graybar, many of whom have worked for the company their entire careers and have been promoted from within the organization. Our board has more than 300 total years of service with Graybar.
Graybar’s promote-from-within culture helps reinforce the values on which our company is built, which translates into a shared commitment to carry that philosophy forward. As a board, we view our responsibility from the perspective of stewardship. It’s our job to do what we can to leave Graybar stronger for the next generation. So, when we discuss matters related to ESG, it is always within the context of our core values and sense of responsibility to our stakeholders — employees, shareholders, customers, suppliers, and communities in which we operate — today and in the future.
Are ESG topics discussed regularly in the boardroom? As chair, what is your role in driving the ESG focus/discussion?
Yes, we do discuss ESG topics regularly. Often our discussions focus on addressing the needs of the constituencies and stakeholders Graybar serves.
There are times when a potential policy or course of action may benefit the business in the long term, but may also have a negative impact on certain groups in the short term. We also discuss the potential tradeoffs of investing in one opportunity that may limit available resources for something else. It’s often about understanding the dynamic interplay among our stakeholders and finding the best path forward for our company, our people and those we serve.
How does the board, and management, convey an ESG strategy to employees?
People know what really matters based on our everyday words, actions and decisions. I believe the most important way the board and senior management conveys our ESG strategy is by “walking the talk.” If we say environmental sustainability is important to the business, then we should be intentional about explaining why it matters, what we are doing, and how employees can help. The same holds true for decisions that impact employees, particularly in an employee-owned company like Graybar. We strive to be respectful and transparent in our communication with employees, and we back up our words with action.
In addition, I hold quarterly all-employee web conferences. Often, employees will email questions, which I either answer directly on the call or via email afterward. These all-employee web conferences often touch on ESG topics, either directly or indirectly. This gives me a perfect opportunity to convey and reinforce Graybar’s commitment to responsible ESG with our employees.
Our senior management is intentional about participating in a wide range of employee events — from large conferences with hundreds of employees, to smaller groups of employees that gather for training or professional development. We especially seek out opportunities to engage with newer employees, such as our interns, leadership trainees and front-line salespeople, because we believe it’s vital for them to start their careers with a clear understanding of what matters most to us. Engaging with employees in these settings gives us a way to build trust, establish relationships and help them learn about the company. It also helps us understand what’s important to them so we can make decisions with their interests in mind.
Furthermore, our senior executives are committed to visiting at least 10 branches a year. During these visits, our senior management has the opportunity to share our ESG approach to our organization as well as receive feedback and input from all of our employees.
As I mentioned earlier, Graybar does not view ESG as a program or initiative. It’s just how we do business.
Does being 100% employee owned help or hinder this ESG focus? How so?
I believe being an employee-owned company helps us sustain our ESG focus. One of the greatest advantages of being employee-owned is the fact that we can take a long-term view when making decisions. While we pay attention to our short-term results and work to improve each quarter, we are not driven to impress analysts or drive up our share price. That allows us to make decisions and investments that will have a meaningful impact on the company and its stakeholders in the long term.
I also believe that our structure helps align everyone around shared objectives and core values. As owners, our employees care deeply about the company. They are proud to work here and give their best to help Graybar succeed. There are times when we may not agree on the best path forward, but we can work through those differences, knowing that we are ultimately striving for the same goals.
We also have a strong foundation of core values — I call them “non-negotiables” — that assure we do business the right way across the entire organization. This is a vital part of our employee ownership culture and one of the things that has contributed to our long track record of success.
How do you make sure directors are up to speed on the latest issues revolving around ESG?
All of our directors participate in ongoing education, both outside of Graybar and as part of our regular board meetings. This is a high priority, especially for a board comprised of all internal directors. We want to be sure we’re constantly challenging our assumptions and learning from others outside of our industry to provide effective leadership and governance of our company. In addition, all of our board members subscribe to corporate governance publications and forward to one another articles of interest on the latest corporate governance topics, including of course, ESG. We incorporate or adapt to our culture those practices we think are most appropriate.
Does the board, and do company managers, keep abreast of ESG benchmarks that are emerging for public companies? How are they able to do so?
Graybar is somewhat unique in the fact that we are a privately held company, but because of our large number of shareholders, we are required to report our results like a public company. So, we must stay on top of the same financial reporting requirements, governance standards and benchmarks that public companies must follow.
Our teams do a lot of their own research to stay informed on emerging standards. We also work with trusted advisers to ensure we understand what’s coming, how it will affect us and what best practices we can adopt to remain current.
One important way I stay current on ESG benchmarks is by serving on public company boards. Serving as a director for a public company helps me understand ESG at a deeper level and from different perspectives, which then allows me to identify and apply best practices to Graybar’s business. We also encourage our senior leaders to serve on various boards and organizations that increase their awareness of ESG.
Through our research, advisers, and experience with other boards, we sometimes identify changes that will improve our ESG performance. We have a process to incorporate those changes into our own company procedures and systems, and then we communicate it to the appropriate audiences. We try to remove barriers to compliance, so it can more easily become part of our employees’ daily work.
Yearly, we benchmark ourselves against what the corporate governance world considers best practices. Every other year, we engage in a very thorough deep dive. We hold ourselves up against the recommendations and insights offered by, for instance, Institutional Shareholder Services, Korn Ferry, the National Association of Corporate Directors and others. We incorporate or adapt to our culture those practices we think are most appropriate.
What advice would you give private company boards and executives when it comes to adopting ESG policies?
At Graybar, we believe ESG simply represents the right way to run a business. It’s about being ethical and taking a long-term view.
The advice I would give is to establish ESG policies that fit your business. While you can and should learn from others, trying to copy another company’s approach likely will not work. Know who you are, what you stand for and what matters most to those you serve, and then establish policies that align with those priorities.
To me, it’s more important to build trust and credibility through your ESG policies, rather than to put something on paper that is not consistent with your company or its values. It must be something that shows through your decisions, your actions and the way you interact with your stakeholders.
What is Graybar’s short- and long-term plan as far as ESG initiatives?
We will continue to raise the bar on sustainability, both in what we offer to customers, as well as in our own operations — from our facilities, to our fleet of vehicles and our policies and procedures.
We’ll continue to emphasize giving back to our communities. Graybar and its employees have always been very generous with time and resources, but this is the first year that we’ve established a companywide program focused onstrengthening our communities. We believe this is just the beginning and look forward to building on this foundation for the long-term health and prosperity of our communities.
As an employer, we will continue to focus on inclusion and providing our employees with opportunities for professional growth. We already have a strong foundation of communicating with employees, and we will continue to enhance our communication to better engage employees in the business. Our leadership development programs emphasize ESG topics, which helps us develop future leaders who possess strong character and commitment to our core values. And, of course, we will sustain our employee ownership structure, which we believe is vital to preserving our culture and strengthening our company for years to come.