Looks like the numbers seem to be settling out. Thank you, everybody. Good morning, good afternoon. I'm Olivia Tong. I lead the coverage of beauty, beauty retail, and consumer staples products for Raymond James, and very excited to be hosting this chat today with e.l.f., and talk about ESG to hear more about their initiatives and see how ESG has contributed to the strong performance of the company. I also want to mention that e.l.f. is one of our ESG analysts' top picks and is on the Raymond James ESG Focus list. So have a look at that report if you have a chance. Hopefully, you also saw e.l.f.'s impact report for fiscal 2023, which was released not too long ago.
A few stats there: They are first in the beauty industry to achieve Fair Trade USA certification for manufacturing facility. Their products are cruelty-free, and the company has committed to removal of any forever chemicals, those are PFAs. It has set its packaging goal of 100% of e.l.f. Beauty, e.l.f. Beauty paper cartons to be Forest Stewardship Council, wow, that's a mouthful, certified by fiscal 2025 versus 23% in fiscal 2022. We're delighted to have with us today to discuss this and many other initiatives, Scott Milsten. He's the Senior Vice President, General Counsel, and Chief People Officer for E.L.F. He's in charge internally at E.L.F. with all things related to ESG. He's been with E.L.F. for 10 years, so fun fact, he's been with E.L.F. the same number of days as Tarang. Ellen Leung, VP of Sustainability.
This is a new role for E.L.F., but she's been with the company for seven years. Then, of course, KC Katten, VP, Corporate Development and Investor Relations, who helps all of us, sell side and buy side, with the strategic initiatives for the company, including how ESG factors into everything. So thank you, guys, for joining us. We really appreciate it.
Thank you.
Maybe let's start a little bit, given that the report just came out on the impact report for fiscal 2023. Maybe can you share some of the key initiatives there, accomplishments, and overall, where you stand relative to your goals?
Yeah, I can take that one. So thanks, Olivia, first, and the Raymond James team for hosting us. It's an exciting time for us. As you said, we released our second inaugural report just last week, and as timing set itself up, we actually took the entire E.L.F. team, about 300 people, on a Zoom yesterday, through the impact report to make sure that you know, the team understood and saturated all the great material. So now we're going to move outward facing, so timing is perfect. So we really, really appreciate the opportunity to chat, 'cause we are really excited about the progress we've made in some of the areas that we're targeting.
So I'll start on a couple in terms of accomplishments and maybe some that are closer to me, and Ellen can talk about some that are more passion areas of hers. So for me, in my people role, of course, our sort of leadership in diversity and inclusion has always been a hallmark of E.L.F. So, I know, our board stat is pretty well known, but I'll say it again because it's one we're super proud of. One of four public companies with two-thirds women, one-third minority representation, and the denominator on that is 4,200. So we feel that's a pretty good barometer, and what we're doing is rippling through that, and it always has rippled through, I should say, the entire organization, right?
We're 70% women, 40% diverse community, and our commitments on that one in particular is we want to make sure that that permeates all levels of the organization. So we have the same commitment to have our leadership level reflect that representation. And our impact report shows where we are tracking to that. I think we're at 68% on women representation, so we're within a stone's throw of the 70%. Other areas that I think, you know, we've made a lot of progress in is, as you said, the sort of sustainability element. And that's, you know, one that is extremely important to us, even just starting with the consumer, right? Our consumers, this is a passionate area for them.
If you look at sort of millennial or teen surveys in terms of what is important to our consumers. So there's a beautiful dovetailing there about what our consumer wants and what we're going to be going after. And so the Fair Trade Certified, we can probably talk about that one a little more in-depth later, because that was a big lift and a first mover for us. But also the forest certified, getting that up to 100%. We also have some work going on with brush handles.
So, overall, the architecture is the same as our first report, but what I would say is an important addition is the transparency on goals, and that's a new addition this year, where we have a list of probably 20 goals, where we stand and where we're going, and love both the transparency and accountability that brings to our organization and the focus. So that's a new addition, I would say, just even architecturally, a new addition that we're proud to do, and it gets us on the path.
That's very helpful. Thank you for that overview. Perhaps we can turn over to ROI, because that's obviously very important to investors, and we'd love your view in terms of how to measure the returns of social impact initiatives. Do you think of this as a cost or a cost saver? And what do you think your peers view this as?
Yeah, it's an interesting one, because I know, you know, sort of you hear cost or cost saver. So I'm going to maybe take a little different spin, and then maybe Ellen can help us on the cost savings part, just because I have it. But I really just sort of view it as an absolute business driver. It's helping fuel our results. And so I almost view it more as like a top-line sort of enhancer as a start. That starts, as I said, with the consumer, right? These are consumers. We are a purpose-led company that wants to bring exceptional business results. Our consumers want, you know, sustainability, as I said, climate impact.
I mean, I can just think about, you know, the teens I know who are living in my home, shall we say, my daughters. You know, this stuff matters to the generation that's buying our, our products, and so we want to be very much in tune with what's important to them, and I think that some of the initiatives we're taking here are absolutely just spot on for that, for that, that demographic. Internally, too, and I would just say that, again, as I think about a business driver, how are these initiatives helping drive business results? I see it at the employee level, too. Attracting and retaining top talent. So our employee base is passionate about these projects, and anytime you can have passion in your organization about anything, it's, it's great.
It's infectious, it actually gets people going and charged up and fired up to get after something. And so I see that, just in my role as head of people, really being sort of a crystallizing thing around the organization. In terms of attracting talent, too, and it's just, it's anecdotal, but it's happened too many times to be not. More times than not, when I'm interviewing folks or talking with folks about e.l.f., it's the impact report that we end up talking about that they've seen. "Oh, I was looking through the impact report. This caught my eye. Boy, am I passionate about this.
I can't believe what you're doing here." So in terms of, like, in attracting and retaining top talent, I just see that these initiatives fueling our results, both with the consumer and with our employees. Now, on the sort of cost savings, hey, you have to make some investments. Ellen's probably... I know she and I have talked about that, where some of the initiatives we take, you know, dovetail beautifully with, like, oh, it's quote, "better" and costs less. That's—I mean, those are great examples. I don't know, Ellen, if you have any of those that you might share.
Sure, yeah. No, and I think, also just to echo what Scott said in terms of the people piece, I can't say sort of how many times meeting a new person, and they're just like: "Oh, impact report, you know, that's what really brought me to e.l.f." in terms of just the work that we're doing across all of these different areas, just being, like, that extra piece of incentive to really be part of the company. I think in terms of cost, we probably see, so it depends on what we're looking at here, but I'd say overall, there—I don't—we don't see sort of this direct connection between must invest with, like, a cost impact and being able to drive on these initiatives.
So there are examples of, you know, where we might make a-- where we're gonna invest in certain things to, you know, like FSC is typically a little bit more expensive than non-FSC paper. It makes sense, there's certifications behind it, etc . But there's tons of other examples of places that we're working, where we're getting sort of both things. We're getting enhancements around sustainability, and we're actually being able to find cost savings, too. And I think a great example of that, really, even looking back historically, as a company, Project Unicorn, the packaging initiative that we launched in 2019, and kind of has since evolved into a much more robust strategy around sustainable packaging. You know, that started with a focus on really driving productivity.
There was a piece around cost savings, and it really came with all of those things and also a sustainability benefit. So that's a great example of an initiative where you get all these different pieces working together to deserve everybody's benefit. So, I think, that's kind of how we're looking at cost. It's not necessarily one or the other.
Got it. That makes sense. Perhaps maybe think about benchmarking against your competition, right? Who do you look at as leaders in the areas that you're hoping to achieve more?
Sure. And I'd say, you know, in that area, we typically look at our public beauty peers, as well as other consumer companies that are of a similar size. We think that's sort of a good pulse point, both in terms of the industry in specific and also the broader consumer segment and what's important in that sort of bigger pieces of pie. I think as a company, when we think about diversity, and Scott has certainly sort of talked through this piece, we really think that we're a leader in that diversity space. So he mentioned the stat around one of just four public companies in the U.S. with a board of directors that's at least two-thirds women and one-third diverse. We have public beauty peers aiming for gender parity in their board and leadership teams by 2025.
With our board composition and a leadership team that's 68% women, we're already there. And so our hope is really that, as we look to our peer set and the industry in general, that it's gonna be more than four companies to get to those levels of diversity at board level, and really looking for that continued progress around gender parity at leadership levels across industry. I think where we're continuing to make progress on is in our environmental initiatives. So as Scott alluded to, we're really proud with this year's impact report to lay out very clearly, I think, what our specific commitments are and what are the goals that are associated with those. So just to highlight a couple of the new areas. The first is around reducing our packaging intensity by 20% by 2030.
So, I had talked about Project Unicorn previously. That's a project that's really delivered great results in terms of packaging reduction, so I think 2.5 million pounds to date of excess packaging sort of eliminated from our packaging footprint. And this goal is really a great way to solidify and quantify that going forward, and really provide focus for what we're going after. Secondly, we've expanded our commitment around the use of Forest Stewardship Council, and I'll just say FSC from now on, certified packaging materials. Last year, we had gone out and set a goal to be 100% FSC certified for our paper product cartons, and we've made really great progress against that. I think we're at 70%-75% at this point, again, marching towards that 100% goal for 2025.
What we've done this year is added on an additional goal under FSC, which is to have all of our wood brush handles be made of 100% FSC certified wood, also within that same time period. We think that's particularly meaningful, particularly because of our leading position in mass cosmetics brushes. We're taking a stand on this, and we think it's really important, so wanting to extend that to wherever it makes sense in our business. Then lastly, in terms of greenhouse gas emissions, obviously, a super important topic. This year, we set and met Science-Based Targets for our Scope 1 and 2 emissions, and really, our focus now is going to be on Scope 3.
Obviously, the bulk of our emissions sit within Scope 3, as you know, many companies in our sector, and so that's really our focus. A lot of the other initiatives that we'll be talking about obviously ladder into and support those goals, but that's really a key area of focus for us.
That makes sense. What about your suppliers? I mean, part of what helps you, on profitability is your manufacturing is all done by third parties.
But how do you make sure that your suppliers are also on board with all the sustainability initiatives and goals that you have?
Sure. I think, with respect to suppliers, I think we feel quite fortunate. So we choose and, you know, proactively work with suppliers that we believe align with our principles and values, so sort of at that level. And we feel that we have a really strong alignment with them on our sustainability initiatives, and I'll just give a couple examples to give a little bit of color to that. So, Scott has talked about the Fair Trade certification that we've done, helps E.L.F. Beauty to have a third-party manufacturing facility, Fair Trade certified. That's something that we were able to do last year. We've added additional suppliers to that program, and we're now up to 75% of our product volume being produced in Fair Trade certified facilities. So that's huge and substantial. It was a big lift.
I don't think it's something that we could have done without, obviously engagement with Fair Trade and E.L.F., but also the partnership of our suppliers. That requires sort of ongoing work with them. Every year, there's a recertification over 100 compliance criteria across social, environmental, and economic factors. And so really, that doesn't happen unless you've got good relationships and the best strong support with your supplier network. Secondly, we're working with our suppliers on... We have completed EcoVadis Supplier Assessment, so that's a globally recognized certification process that looks at social, environmental, other factors related to supplier sustainability. And we've had great success. 95% of our direct spend with our suppliers is under this assessment.
We're really proud that our suppliers are 17% points above the EcoVadis global average, and we've seen year-on-year improvements in their scores. Thirdly, we feel that we have really good engagement with our suppliers on these sustainability topics. So we have semiannual supplier summits. This is a key topic. We've set up roundtables where some of our suppliers can share best practices, and we do feel like this is a point of attention with them. I think one example where we've seen some movement, and just I think an example of where they are, four of our key suppliers are investing in solar energy infrastructure and new manufacturing sites. So as they're building new facilities, that's really part of the remit around how they're setting up those new facilities.
So we're really excited to see that, and I think that gives us, you know, confidence in a path forward. So overall, really pleased with the engagement that we're getting from our suppliers on these topics.
Got it. How about, you know, in terms of the brand, right? So obviously, ESG is a huge focus for you. How does ESG impact and social responsibility fit into the broader brand ethos?
Yeah, so I think so a couple of ways. If I think about sort of how we sort of think of ourselves, articulate our place in the community, it's, you know, sort of we're that bold disruptor with a kind heart, right? And so I think both of those elements really come through in our ESG work, right?
So the bold disruptor, I mean, Fair Trade certified, Ellen, gave it a snapshot, but that was a huge lift. I mean, just a huge, huge lift, right? We all, we, Before this project embarked for us, I have to confess, I was like, "Eh, Fair Trade certified, like I know it in coffee." Like, that's sort of what I was... Fair Trade certified, but, oh, let's-- So that's an idea of, like, where e.l.f. takes something in another, you know, vertical or industry and then brings it into beauty. So that's a, that was a pretty disruptive initiative, and it's one that, again, we're not-- we would be elated for everyone to sort of follow that. It's not-- we don't wanna be the first and only mover there, right?
Just for the benefit of the broader group, that means we're making monetary contributions to those factories and the workers and the communities, right, to enhance sort of livelihoods of those factory workers. So that's the kind heart part of it. And then you sort of go, "Okay, well, that sounds like the kind heart part of it." Absolutely right. So another one, so like, we'll say that's the community that starts way up in the supply chain, and maybe on the other end, what you see in this year is our first publicly stated commitment on just contributions to organizations that align with our sort of values and purpose, right? And so we set an external goal in this year's impact report of 2% of the prior year's net profits n umber of companies do 1%.
I don't know that we're going to quibble over one versus two, but the fact is that last year, we actually did 3% and some initiatives that really do resonate with both our employees and our consumers. Big contribution for sort of mental health awareness and for a collaboration we did with Anastasia Pagonis, a blind Paralympic swimmer. That was her favorite charity. We've done some work with charities and that are near and dear to our good friend Jennifer Coolidge, who we had a big launch with yesterday. But these sort of things are sort of that kind heart part of it is important, and we take that all the way down to the employee level.
E.LF.. is a, we have a sort of somewhat interesting match program, that each year, employees get to have donation, up to $500 that's matched, both by the company and by Tarang and his wife personally. And so we get sort of a 3x match, and not only is it sort of a monetary contribution, but you get to pick the charity that's important to you. And it actually sort of reinforces and lets us see, hey, what's important to our employees? It might be, it might be a camp that they went to when they were younger. It might be something on reproductive health. So again, that kind heart always showing through in what we do is critical to our, our sort of company DNA.
I hadn't heard that stat about Tarang and his own personal.
Yeah, he does. So probably for the last three years. He has said we have to find a better way to automate this because his check-writing hand is getting taxed. But really gives him insights too. Like he went: "Oh, why'd you, why'd you contribute to the... Oh, I see. You're into social justice. Oh, you're..." So it's really again, some of those personal elements that you see in these initiatives that enhance connectivity of the team and what we're trying to accomplish.
I'm sure that has a huge impact on the culture as well.
Absolutely. Absolutely.
Let me stop there for a second and just let the audience know that if you do have any questions, feel free to put it in the chat or email me at olivia.tong@raymondjames.com. I'm also on Microsoft Teams, Bloomberg, what have you. So if you have any questions, please feel free to enter that into the chat. I just wanted to continue on that culture portion as we let some questions queue up. But you do have a culture of clearly some clearly fearlessness, thoughtfulness, proactivity on ESG initiatives. How does that factor into your impact strategies as well?
Yeah. So I think, look, I think it's areas that we will be bold and try and take a stand in. So we gave the Fair Trade Certified example, right? That was really a knock on the door of fair trade. "Hey, have you ever done this with beauty?" "No." "Would you like to think about doing it with beauty?" Okay. And so I think that was a two-year journey in terms of actually all the work that went behind establishing, right? Because at that point, we're establishing with fair trade and supply chain in China, so you can already see the sort of multi-headed dynamics here of what that checklist is gonna look like in order for fair trade to put that stamp of approval in terms of working conditions, things like that.
So that one is probably. I would just say, the centerpiece of like, where we would just take an idea and move it entirely into beauty. Look, I think our diversity initiatives, we've been quite vocal about. I wanna continue to be vocal about those, as that's a pretty fearless. And I will say either call it fearless or intentional. We're quite intentional about having a company that mirrors the consumers that we serve, top to bottom. And so those are two areas that I think are gonna be hallmarks for me. I don't know if, Ellen, if you have any others that you want to touch on.
I think, you know, and maybe this gets into sort of the topic around marketing, but just sort of like how we bring these points forward in our marketing campaigns. I think it's also just sort of a reflection of, it's doing the work, but also how do we connect with our communities on these points? And so it, you know, I think on that matter, it really all ties back to our vision. You know, a different kind of beauty company, building brands that disrupt norms, shape culture, connect communities through positivity, inclusivity, and accessibility. And really, like, each of those words is very intentional and thoughtful, and that's what kind of comes forward in how we engage. So I think Scott gave the example of Anastasia Pagonis.
That's part of a new series that we've launched called Show Your Self. It's really focused on sort of these inspirational role models, overcoming adversity and sort of providing that touch point with our community on those types of challenges and sort of where people are breaking through. Obviously, you have diverse models, creators, community members. I think that's all really sort of part of how we bring these initiatives and efforts sort of to life with our community. I think on a different vector, but very related, when it comes to environmental impact, we're starting to engage with our community on these topics as well. One that I'm excited about is we're starting to roll out How2Recycle labeling for e.l.f. skin products.
So going to be showing up on packaging, on product description pages. And so, we feel that's like an opportunity to talk with our consumers about recycling. What does the label mean? What does it mean, when it should be recycled, when it shouldn't? And together, we can kind of work on making sure that we're increasing recycling rates, reducing contamination in recycling streams. And so I think both of those are really great examples of how we're looking to partner with our community, not just speak to them, but just kind of have this conversation around these areas that we all think are important.
Makes sense. I'm just going to ask one of the questions that's in the chat, since we were talking about suppliers. Do you have long-term relationships with suppliers, with long-term contracted volumes? And to the extent that these are mostly short-term negotiated arrangements, how do you incentivize suppliers to undertake ESG initiatives?
Well, I would characterize the majority of our relationships as relatively long-term. I think many of the suppliers that we're working with today, we've been with them for a number of years, going back, and so it's kind of sort of a continuous build together on the partnership around sustainability initiatives. It's not like we're swapping in and out of different ones over time. We're working with them and building with them as we're planning forward into the future.
Yeah, I'll just echo that. And this is a little bit more insight, perhaps, into the supply chain versus the ESG nature of it. But, as we started off saying, I've been here for a decade now, and these are multiyear suppliers. So this, just for broad base, this is not sort of a drop a PO, and, you know, ship to the next person. So, a lot of us have been at our supplier summits in Shanghai over the years. The top suppliers and the top volume has generally been the same for five years, six years, seven years, eight years plus, with a pretty thorough culling. China is very direct about scoring and showing scoring, and so bottom performers fall out, top performers rewarded more business.
So these are, these are long-term. And again, it goes back to, if you think about e.l.f., our volume, right? We're a, we're a high volume. I mean, these are, these are massive unit numbers for suppliers, so they're highly incented to stay engaged with us, given our business performance and the unit volume that e.l.f. achieves.
Got it. Maybe let's get back to customers, which you touched on, Ellen. How have customers responded to these social and environmental initiatives around your products? Do you see a willingness from customers to pay up for more socially, environmentally conscious brands?
Yeah. So as I was talking about a little bit before, I think we, you know, we enjoy this, this dialogue with our community, so super transparent through the impact report, social media campaigns, really around our diversity, our sustainability initiatives, and, and really just having that conversation with them. And I think, you know, we give the example of how to recycle, fair trade. So all of these, like, it's sort of this, this, this, constant communication of, of what we're working on, and also, I think, really importantly, what's important to them. So I, I think a great example of that is feedback around our, our e-commerce business. So, in the last year, we've really, kind of upgraded and improved our, our e-commerce, delivery model for our consumers, and it really hits on two things.
One, it hits on the consumer experience, and two, it hits on sustainability. So in general, we had one distribution location for the U.S. We saw an opportunity to move closer to the consumer for faster speed. And as well, with that move, we were able to switch from... We used to have this large shipping box that was a little bit unwieldy, to say the least. Got a lot of feedback on that, and we were able to switch into this much lighter weight shipping envelope. 84% less material, so just substantially smaller environmental footprint. You got the faster delivery times, less distance traveled, less carbon emissions.
So it was kind of a win all around, and it really kind of, it really came out of that conversation with the consumer around their e-com experience and looking for opportunities to improve that. So that's kind of speaking to the consumer customer. I'd also say on the retailer customer side of it, we're really starting to see some meaningful engagement there as well on sustainability topics. So whether it's requests for CDP disclosure, pushes on Science-Based Targets, or conversations around sustainable packaging, we're really starting to hear these retailers asking for brands to disclose, commit, and act. And it's an important, I think, point for us, additional data points around what they're seeing with consumers in stores and online. And it just...
I think it's all sort of this continuous build around these topics, which I think for me personally is, I think it's encouraging, inspiring, all of that, just because you hear it, you hear sort of the clamor for this work all around, and I think that just kind of fuels us all. So I think that's, that's super exciting.
Got it. Perhaps can we talk about your people and the intentionality in your people strategy? Because you really put a focus on D&I for many years. I mean, you feature your stats front and center on the landing page on your website. How does that come to life every day at e.l.f.?
Yeah. So I would, so look, you're, you're absolutely right. It, it was intentional, and intentional from, early days, I would say. The, the anecdote is when we were thinking of... I mean, way, way back when, so I, I, and some others, when we were thinking about having that vision of perhaps going public and thinking about what that spot, you know, the, the bell ringing ceremony would look like, and who should be up there, and who do you usually see up there with those, and what are those demographics? We're like: Yeah, we have a view of what that should look like for a young beauty company, and it should be look like the consumers we serve. So we got after that early, early, early in terms of the board and leadership positions.
We love that focus, and so that has been part of our DNA through and through. You know, as we think about it, today, look, we're very proud of the 70% stats, probably even getting closer, well above 70%, women, and 40% diverse. We take best talent. I mean, that is our approach for sure. But, you know, as we found, is that as you sort of think about the diverse views that we get and the business drivers and how we get, you know, different views from people, it's something we continue to focus on in as we sort of build the company and build it out.
I would say that's why we've put the focus on making sure that the stats hold true at the leadership team level, right? A lot of people could give stats that, you know, that sort of are bottom weighted, if you will. We wanna make sure we're 70% women at the leadership level of the company. As Ellen mentioned before, we're right about there, and so 68%. So always gonna continue to focus on that. And just look, I think, for a company of our size, the differing views, the way that this team works together, the chemistry that we have with this sort of mix has just served us exceptionally well. It's served us exceptionally, exceptionally well.
And so it's something that we're gonna continue to think about, focus on and be a leader. Again, another one of those where we would say, like: Please join us in that. Let's hope there's one of 10, one of 14, one of 57, all the better, right?
Makes sense. Perhaps, following up on the employees, the shares. The shares have been on quite a run since May 2022. They're up over 100% year to date. Employee stock ownership is, is very high in the company. How does that influence your workforce, and, and how important is that to the management team?
Yeah, this is one I could, we can go on for a long time, because it is... I'm deeply passionate about this one. So, let's start with the framing. We give equity to every employee. And so that is unique in the beauty space. We may be one of one. It's hard to tell exactly because you can't sort of parse through every company, but, like, elite company in terms of that. And what, the benefits of that approach have really been massive at our company. And so what it, the way we think about compensation is what we call a one team, one dream approach, right? And so what I love about the system at e.l.f. is everybody has some sameness that I find very unifying.
Base salary, a bonus target that is based on the same metric, it's our Adjusted EBITDA metric, publicly reported, everyone is on that, and we all have equity. So those components are across the board. So what does that do? That means that when we're talking comp or business success or share price or bonus achievement, there's only one meeting, right? There's only one meeting. It's not the leadership team is over here or the juiced up leadership team, special spiff and over here. So the fact that everyone has sort of rises, falls, and hopefully rises, as you said, some nice rising recently, this year and last year, absolutely. It's been, it's been an incredibly unifying thing, right, principle. And for me, just look on a, on a personal level in terms of like: Hey, what do you...
What excites you about e.l.f., and what keeps you going day to day? Our stock's done terrifically well. If you've been here for a long time and had a new hire grant, we give a new hire grant to everyone and an annual refresh grant. So this is not just a come in the door. So everyone, new hire grant and annual refresh grant, you've now built substantial equity, and you've built substantial wealth. And so personally satisfying to me is when someone says: I'm starting a new backyard project, I'm paying off student debt, I'm going on a vacation. That is, that is unbelievably motivating for, our employees. I mean, just absolutely. And so I, I love to hear it, personally, and I just think that one team, one dream principle has served us well.
I should say, if I didn't say it before, that like, everybody means everybody. I know I said everybody. Our employees in China, very new to them, right? A U.S. company giving everyone in China, like, they... Even some of them have worked for multinationals before, that was not part of the program. Oh, you're abroad, you don't get that. But so I go to China, we do the same thing. What, how the RSUs work, how do they appreciate in value? What might you think about? So, love, love, love that part of our culture and our comp philosophy.
Great. Perhaps, one question that's come in on, over email is on the social side of ESG, does e.l.f. map out any risks for people either working in supply chain or on direct operations, whether with respect to safety or wages?
Sorry, do we map out risks with respect to sort of safety or wages
Do you, do you map out any risks for people either working in supply chain or on direct operations? So thinking about how you manage risk for your employees, I think is the underlying crux of the question.
Yeah. So certainly I can take... I mean, look, we operate facilities. I mean, so I sort of think about it maybe in two ways. Certainly, we operate a number of facilities ourselves. We are not the manufacturer, but we have massive distribution centers, you know, spread throughout the states here, a main one in Ontario, and we, as Ellen just said, we moved to sort of a multi-node thing. So, yes, we certainly take and measure safety at all of those facilities in terms of just I think you're talking about. I think if we're talking about pure workplace safety... Yes, we have a ops team that is deeply steeped in safety issues. We have a lot of people from, as it turns out, beauty, yes.
We also have a lot of crew that was in food, which is a huge safety sort of focus area. And so, just in our hiring, we've got we do have a team that is quite focused on sort of just, I'll call it employee safety, and we certainly think about it here. We think about it here in terms of moving to hybrid work and what does that mean and how is all this, and working a nd at the supplier and supply chain level, look, what I would say is, you know, we are a little different than some that maybe just use, we'll say China, as sort of an outsourced model.
Remember, we have a team of 90 people in China, and so that we, you know, so we are in our factories with our, with our suppliers. This is not just, as I said, a PO across a fax machine. This is on-site with regularity. So I think that that enhances our sort of safety and risk profile by having a presence at our main suppliers in China. And again, back to what Ellen was saying, these are like-minded suppliers. We are a value brand, but we want top-tier suppliers in terms of safety, quality, speed, business practices. That's the only people invited in that ecosystem. And so, our team in China helps ensure that.
That's great. Another question that's come in about employees and exec compensation. Is any part of the exec compensation tied to ESG initiatives? And if not, is there any discussion around that?
Great question. So the answer is, at the moment, no. Discussion, yes. So we are. So maybe I'll just sort of refresh on how we are compensated now. So we do have, in terms of, like, progressive and best practices, where are we? We have base salaries that have remained the same for the entire executive team from day of hire. So you start off by saying, "I started 10 years ago. My base salary is the same as it was 10 years ago." Has not moved a bit. So fixed cash with a much different emphasis on upside on the equity. So, fixed cash portion, we have all had the same base salary from when we started.
The equity component, we have moved towards what I would call a best practice approach, which is a combination of time-based but also performance-based equity. And so those performance-based units have a three-year sort of cliff. And so you're talking about business performance over a three-year period. So that usually aligns very well with shareholders who say, "Hey, I don't want all time-based. I don't want this. I want something metric." And so a three-year cliff for the executive team on performance share units is where we've gone. It also has a market share component. And so that's something actually we got a lot of investor feedback for. They like that component. We introduced it once and said, "Hey, like, maybe you're still hitting your metrics, but what if you're losing share?
What if you're getting clobbered out there?" Market share is a nice one to do because you sort of, you know, it works in the ups and it works in the downs. If you're taking share, you're taking share. So we also have that component. So now we've got sort of performance, and we've got market share. So now the what's next? And the what's next may very well be ESG. It is a discussion topic. For the group's broader benefit, we have a bunch of board members certainly interested in this, but a pretty leading investor, Lori Keith, is an ESG expert who's on our board and is always keen to share with us some best practices.
And so that's a discussion we're having with her on what might be the right time, what is she seeing out there, what's resonating, what's working, what's not working? So yeah, I would say not immediate, but in the discussions at present.
Sounds great. Hopefully, you do start getting more credit for all the initiatives that you've put into place. It certainly seems like you're getting it from customers and from employees. Hopefully, it'll continue to...
Yeah
to expand beyond that. Let's talk a little bit about maybe a bit broader, you know, focuses. You guys have talked a lot about expanding into other categories, expanding into other into more geographies. As you consider this expansion into new products and new geographies, can you talk about the vision, the market opportunity, how that changes your view in terms of ESG? And then also, how does that potentially impact itself with respect to profitability as well?
Yeah. Ellen, you want to take some of those, or you want me to kick it off? Whichever. I'm happy to go either way.
I guess, I think in terms of just on the ESG piece and expanding to other markets, so obviously, U.S., we've got an international piece as well and obviously looking to grow that. So one of the things that we're sort of keenly aware of is sort of the, I'd say, just in general, like in Europe, for example, like a high, high focus on ESG topics. I think we see that in conversations with investors. You know, obviously excited to see the engagement here in the U.S. as well, but that's always kind of been there. You go to Europe, you see signs everywhere of building ratings and taxi ratings from a carbon perspective. So it's just like more of a front and center topic in that market. I think as we think about it in terms of our product.
I'd like to say that we're sort of building that in as we create our products. So even if we think about maybe just taking ingredients as an example, so where we sit in terms of our ingredients is very well aligned and sort of even ahead of the requirements around EU restrictions around ingredients. So we've kind of built that in even maybe before we were fully there, right? So we're kind of ahead of, I think, the requirements on those points. And even as we think about more of the requirements around carbon, packaging, etc , very closely attuned to what's happening in the European market. And so I think, you know, we're not sort of building products that only really work in North America from a requirements perspective.
We're looking at that global perspective and taking that in as we build our portfolio, look at the requirements around those. And really, obviously, as a company, we don't just seek to hit the requirements. We're always aspiring to reach beyond them. So I would say, that's kind of how we're thinking about it from a global perspective.
That's great.
Also, just some quick touch points on, as we think about supply chain diversification and, where our suppliers are. Geography obviously matters quite a bit, as well as sort of their own business practices. So we're pretty thoughtful about what we are gonna seek in terms of any supply chain diversification that we look for. You know, interestingly, you know, in terms of, how far do products move, which is a big, you know, sort of environmental, aspect, you know, our upcoming acquisition of Naturium, they're a U.S.-based... They have a U.S.-based manufacturing network. So that, again, sort of gives us some both diversification, and we'll also think about, like, hmm, okay, now we've got a different mosaic of suppliers. How does that influence our future? How does ESG figure into that?
How does, you know, shipping time, carbon emissions, et cetera, figure into that? So as we grow, we sort of are mapping out those thoughts as well with the supply chain generally.
Great. And then in terms of environment, we touched on this a little bit, but would love to hear a little bit more about thinking about your customers, right? Lots of Gen Z customers for you guys. They obviously care a lot about the environment, and we've seen in every survey how much they vote with their dollars, too. So can you talk about some of the initiatives that you have there, the goals there as well, and how you communicate that to the world?
Sure. And certainly recognizing climate change as sort of the challenge of our time and really wanting to be part of the solution there. So focus on carbon footprint is really critical for us. I think just sort of taking us back to maybe where we were a year ago, we had first measured our greenhouse gas emissions, so that was kind of our starting point, just really understanding where do we sit, where are the hot spots, and so that was kind of sort of step one. Since then, as we sort of referenced earlier in the call, we've set and also met our emissions targets for Scope 1 and 2. And really, the key focus now is on Scope 3.
Obviously, that's the vast majority, similar to other companies, in our space and in beauty, those emissions sitting in the value chain, so all the way, basically, from cradle to grave. What does that look like? So that's where we're focused. We know there's opportunities around product, there's opportunities around logistics and transportation. Those are probably the big ones, and so really diving in, across the company to sort of dig into what are those opportunities. I'd say, we're also focused on increasing our transparency and reporting. So this year is the first year that we've disclosed through CDP's climate change questionnaire. And then, as part of sort of that overall picture around Scope 3, also really looking at our the packaging. Packaging is a key part of that.
So, you know, Scott had sort of alluded to the distance that products travel. So kind of the equation is how much mass, like, how much product are you moving, how far, is really a key piece of Scope 3. So anything that we can do to reduce that packaging weight and mass is gonna be a key driver of our emissions. So we've talked about some of our commitments there, the 20% reduction in packaging intensity by 2030. You know, we talked about Forest Stewardship Council certified materials. Obviously, that has an impact on the forests, etc. , responsible forest management. So a lot of key pieces coming together for us, and I think we're really most excited about, like, we've started the journey.
There's a lot more work to do, but we feel really good about the new commitments that we've put in place and the plans that we have to action those.
Got it. Being mindful of time, and as we get sort of close to the end of the hour, I wanted to ask if, you know, Scott and Ellen, you've been at the company 10 years and seven years respectively. How has the role changed over that time? You know, obviously, a huge amount of change with respect to the environment, with the company, the amount of growth that you guys have achieved. So how has your role changed over that time?
You said my role specifically? So, Ellen and I are probably pretty interesting edge cases on this, which sort of says, "We may hire you to do one thing, but you're not gonna end up doing that one thing." So I'll start with me. So I look, so I may, I, I am by training a public company general counsel. That's what I was hired to do, and this is e.l.f.'s, the third public company I've been GC for. And lo and behold, here I am talking about mostly people and mostly ESG. And so, for myself, look, the addition of sort of the people element has been a huge role change for me. But...
And so you say, "Well, okay, that's you. It could have been someone else in the human resource role." But, like, even the evolution of that has just changed so much over these last years. I mean, obviously, we had to, when collectively we all tried to navigate a pandemic. But now sort of, you know, we're asking ourselves sort of future of work questions, what's it gonna look like? And, you know, what kind of company do you want to be in terms of that? And so, like, I think still as we continue to grow, we benefit greatly from our size and sort of tight team connectivity and the things that sort of unify us in terms of that one team, one dream, or a high performance teamwork.
So we still have, I would say, great connectivity and collaboration amongst the team, even as we continue to grow. But that gets more challenging. So that, I'm just saying that's something that we think about as we sort of future forward the organization. We're about to have our fifth brand in-house. So, like, these are real, real differences that we're making sure we have an org design and structure to support the growth. Because we've got, obviously, you mentioned we've got some pretty incredible sort of growth numbers going, and so, look, that's what we're trying to build, is an org that's gonna to support that, that kind of growth.
And so, that's where I spend quite a bit of my time, I would say, at a personal level, and so that's how my role's changed, quite a bit in recent years.
Great. And, as I had mentioned, I've been at e.l.f. for seven years now. I really came in with a focus on, I'd say, key strategic initiatives, and that looked different at different points in time, but anything from international expansion to Keys Soulcare, Well People acquisition. And then really over time, you know, I'd mentioned Project Unicorn in 2019, that was sort of like our first, I'd say, step into sort of a project that had a focus with sustainability in them, and then it's kind of just ramped up from there. And, you know, as Scott has said, I'm sort of the new in this role as head of sustainability. We're also really excited to be committing to sort of building out a team.
So we have team members in the U.S. and in China that are focused on this. So that's really what's changing, where it was, you know, maybe a project now, it's sort of embedded in the company and how we're thinking about things, and taking action. So I think that's huge. Also, just in terms of, I think connection points across the company, this is a topic, everything that we've been talking about, really, as Scott said, is really important to our employee base. And we see all kinds of activities happening in different pockets of the company.
I think, one of our sustainability managers was in the New York office the other day, having a conversation with the team that does photo production, and they were talking about, you know, how they want to deal with the materials that they're using in that process. Like, is there a more sustainable way to kind of manage that? So we've kind of partnered. So there's a lot of, like, organic ideas that are coming out and just, like, popping up everywhere. So I think just it's becoming a focus for the company and just really excited to see where we're taking this.
Fantastic. Fantastic. Well, in our closing minutes, any last thoughts? Anything that... We covered quite a bit of ground with respect to all ESG, so, any last thoughts with respect to any of the above? So look, for me, I—first of all, Libby, thanks for, thanks for hosting us. We love, we love being able to talk about these things, and we, we appreciate the acknowledgement as an ESG top pick, for sure. It's something we are committed to. And yeah, I would just say, you know, Ellen's last point at the end is not a small one. By now, having a Vice President of Sustainability and building a team around Ellen is only going to increase our sort of commitment and focus as we look towards the future.
This is a subject that, as I said, it's a vector of, like, every discussion now. So, yeah, we have to have that intentionality, whether it's with our consumers who are saying, "Hey, what... You know, e-com is too clumsy, too big a box," or our customers, as Ellen was talking about, where they're asking for that disclosure. So it's infused almost in every discussion we're having now, and so what we want to do is reflect that commitment and expertise, as Ellen builds a full team around her for the future. So we're excited about that. Well, thank you so much. Really appreciate you taking the time to walk us through your initiatives. And, Scott, Ellen, Casey, thank you so much again, and best of luck with everything.
Thank you everybody for joining us. Really appreciate you joining us. Have a great day. Take care. Thanks, everyone.
Bye.