Waste management and sustainability go hand in hand, as the merger of Waste Harmonix Inc. and Keter Environmental Services in 2023 shows. Last year, the mid-market companies merged under asset management firm TPG, expanding the services they offer to their respective North American client bases.
Keter manages waste and recycling programs for large property owners such as retail shopping centers, while Waste Harmonics serves properties across hundreds or even thousands of locations. Providing enhanced sustainability and reporting capabilities for both clients is a key challenge.
“Throughout the merger, it has become clear that the two organizations have more similarities than differences,” says Francesco Malagisi, CFO of the combined business. “We are not looking through the lens of how things have been done historically in each organization, but rather through the lens of what is the best approach for every aspect of the business.”
In an interview with our own Katie Kuehner-Hebert, Malagisi shared his thoughts on the responsibilities of CFOs pre- and post-transaction, and how he can help clients advance their organization's vision and objectives around ESG and sustainability.
ESG and sustainability are key focus areas for the waste management industry – how have your efforts developed?
When it comes to ESG, we've been proud to have been at the forefront for many years. Our customers used to be solely focused on cost and getting services at a more competitive price, which has always been an important consideration. But now our customers also want to know that we care about the environment as an organization and through our services.
Our clients' partners and shareholders expect responsibility from them, and therefore from us. We wholeheartedly welcome this and find it extremely rewarding when we can align our sustainability vision and objectives with those of our clients.
When discussing ESG in the waste and recycling sector, two key KPIs are diversion and efficiency. Diversion is a simple calculation to understand how much waste is being diverted from landfills as a percentage of waste generated at your facility. Efficiency is optimizing waste collection and other operations, which is a big part of the value in our model. For example, we can leverage monitoring technology on our customers' compactors and dumpsters to measure fullness and streamline collection schedules, helping to reduce their carbon emissions in the long run.
Nearly everyone wants to do the right thing when it comes to minimizing their impact on the environment. Setting goals and developing programs that will help you reach them is key.
What are some of the first steps that organisations that are slow to adopt an ESG strategy should take?
Start by having an open and honest conversation with your customer. Find out what's important to them and what their goals are (whether they've expressed publicly or internally). Starting with a foundational understanding fosters a shared value proposition and sets a path for getting there within a set timeframe.
Be sure to align your ESG strategy with your corporate objectives and evaluate the risks and opportunities related to environmental impact, social responsibility, and governance practices. Integrate ESG considerations into your financial planning, budgeting, and reporting processes and align them with your long-term financial goals. Then, evaluate projects based on their economic benefits and potential ESG impacts.
Ultimately, you need to understand the extent to which your customers and your organization are involved in building an ESG framework. Then, put in place a plan and hold each other accountable with additional attention to ongoing education and improvement. Transparent communication and ethical leadership will build trust among stakeholders and ensure that your initiatives drive financial performance and environmental impact.
What advice would you give to CFOs navigating a merger?
It is hard to think of a more important responsibility for a CFO than their involvement in M&A. We directly evaluate the financial impact and provide strategic oversight to help deliver synergies, value creation and transformation.
Analyzing the financial health of both companies is crucial. Throughout the M&A process, CFOs need to assess risks and forecast potential synergies, which are key factors to consider in determining financial feasibility and valuation leading up to the completion of the merger.
Outline goals for aligning financial systems, reporting processes, and accounting practices once the merger is executed. Establish a structure to manage consolidated cash flows and capital allocations. Hold frequent planning and budget discussions with senior management to demonstrate financial transparency and ensure the company is planning for its desired future state.
What other key responsibilities will require the CFO's focused efforts both pre- and post-merger?
The three “P's” are people, process, and product. Communicate with your team frequently and consistently through daily team meetings, weekly touchpoints, quarterly consultations, town hall style meetings, etc. Team members understand that there will be some changes with the merger. Be transparent and hype your team up at the same time.
Leverage technology and automation where appropriate to ensure that processes are smooth and efficient. When organizations communicate frequently and honestly with their employees and strengthen their processes, they are able to deliver superior products to their customers.
Don't overlook the need to unify the company culture. The CFO is responsible for establishing a common mission and vision. Internally, it means emphasizing the importance of human capital on both sides of the deal. Externally, it means meeting frequently with customers and partners to share progress and guide them on the path to growth and value creation.
